Yellen faces new challenges and decisions
Print Edition
Janet Yellen will take the helm of a Federal Reserve facing a very different economic landscape than the one that loomed over Ben Bernanke’s tenure as chairman, confronting her with different decisions too.
Bernanke’s eight years leading the Fed were largely consumed with the Great Recession and his efforts to cure it by pushing down interest rates and pumping cash into the US economy. Many economists think Yellen’s big challenge will be deciding how to ease off some of those very policies, which Bernanke took with Yellen’s support.
“Circumstances may demand more rapid tightening than people are expecting,” said Bill Cheney, chief economist for John Hancock Financial Services, who envisions a growing economy this year. He contrasted that with Bernanke, who he said had to decide “when to step on the gas pedal and how hard” as the economy recovered weakly from the recession.
The Senate confirmed Yellen, a long-time Fed official and economist at the University of California at Berkeley, by a 56-26 vote on Monday. Supporting her were all 45 voting Democrats and 11 Republicans, while all opposing votes came from the GOP. Many senators missed the vote because frigid weather canceled numerous airline flights.
Yellen begins her four-year term on February 1, when Bernanke steps down. She has been Fed vice chair since 2010.
Nominated by US President Barack Obama to the top job in October, Yellen comes to the post after a career in which she has focused in part on unemployment and its causes. Obama and congressional Democrats lauded her concerns for workers on Monday.
In a written statement, Obama said Yellen’s approval means “the American people will have a fierce champion who understands that the ultimate goal of economic and financial policymaking is to improve the lives, jobs and standard of living of American workers and their families.”
Many Republicans were less enthusiastic. Senator Charles Grassley warned that a continuation of the Fed’s easy money policies “risks fueling an economic bubble and even hyper-inflation,” which he said could cause “real and lasting damage to our economy.”
House Financial Services Committee Chairman Jeb Hensarling announced that he will hold hearings on the Fed’s bond buying program and on the “potential unintended consequences” of the Volcker rule. That rule, approved by the Fed and other agencies, is aimed at preventing many large banks from trading for their own profit in hopes of preventing practices that helped lead to the 2008 financial meltdown.
Lobbyists for the banking and financial services sectors issued statements pledging to work with Yellen.
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