The White House has confirmed that President Obama
will announce his nomination of Janet Yellen to succeed Ben Bernanke as Chairperson
of the Federal Reserve's Board of Governors.
Yellen, who has served as Fed
Vice Chair since 2010 will become the first woman to head a central bank among
major powers although there are a half dozen in the development world. Her appointment, one commentator said this
morning, will make her the most powerful woman in the country.
Yellen has been a close ally of Bernanke and is
generally expected to continue his accommodative monetary policies as long as they're warranted. In March she said, that the Fed would keep
its monetary stimulus in place even as the economy recovers. "We would not consider selling assets
off until the federal funds rate has increased, so that accommodation will be
in place for a long time," probably until the economy was well into recovery. She has also been noted for her willingness
to risk inflation in favor of stimulating employment.
Despite her recently more dovish tone, she is not known for blindly adhering to an ideology, instead adapting to changing conditions--and quite well. In July, the Wall Street Journal ranked FOMC member forecasts. Yellen had the top score of .52, followed by Dudley at .45. The lowest score was -0.01
Her nomination was widely expected after former
Treasury Secretary Lawrence Summers, rumored to be the President's first
choice, removed his name from consideration last month. Summer's potential nomination had already
raised the possibility of a confirmation battle in the Senate, coming not from
Republicans but from the President's left.
Yellen is expected to face opposition from some Republican senators
because of her stated monetary policies.
She was among the first to warn of the housing
bubble, doing so as early as 2005 while President of the Federal Reserve Bank
in San Francisco. She told an audience
at the Fourth Annual Haas Gala, that there were several reasons why monetary
policy might not be the best tool to deflate such a bubble.
"For one thing, no one can predict exactly how much tightening would be
needed, or by exactly how much the bubble should be reduced. Beyond that, a
tighter policy to deflate a housing bubble could impose substantial costs on
other sectors of the economy that would lead to equally unwelcome imbalances.
Finally, it's possible that other strategies, such as tighter supervision or
changes in financial regulation, would not only be more tailored to the
problem, but also less costly to the economy.
Her bottom line, she said, was that monetary policy should react to
rising home prices or prices of any other asset "only insofar as they affect
the central bank's goal variables-output, employment, and inflation"
When the Board of Governors met to discuss the looming financial crisis in
2008, Yellen was said to be among the most pessimistic in the room. She said, "The possibilities of a credit
crunch developing and of the economy slipping into recession seem all too real.
The "shadow banking system was freezing up, she said, and the economy was
likely to slow significantly.
Yellen became Vice Chair of the Board of Governors on October 4, 2010. She began that four year term simultaneous
with a term on the board that will last until January 31, 2024. Prior to her appointment as Vice Chair, Dr.
Yellen served as President and Chief Executive Officer of the Twelfth District
Federal Reserve Bank, at San Francisco.
A macroeconomist specializing in employment issues, she holds a Ph.D. in economics
from Yale granted in 1971. She graduated summa cum laude from Brown, also in
economics, in 1967 and was a member of the faculty at Harvard University and is
a Professor Emeritus at the University of California at Berkeley where she was
the Eugene E. and Catherine M. Trefethen Professor of Business and Professor of
Yellen, 67, is married to Nobel prize-winning economist George Akerlof, The
two are millionaires with net worth estimated by The Wall Street Journal as between $4.8 and $13 million.