The White House has confirmed that Janet Yellen will be nominated to the position of chairman of the Federal Reserve on Wednesday, the United States’s central bank. If confirmed by the Senate, she will replace Ben Bernanke, who has led the institution since 2006 and will be stepping down in January.
Her nomination comes after a heated debate that was sparked when it seemed likely that President Obama would nominate Larry Summers to the role. Many saw sexism or at least bias in the debate over whether Yellen would be qualified for the job. It ended with Summers withdrawing his name from consideration in September. Yellen would be the first woman to run the Fed, breaking a glass ceiling in an area full of glass ceilings.
Who Is Janet Yellen?
So who is she? She has a long history of experience with central banking. She has served as vice chairman of the Federal Reserve for the past three years, was CEO of the Federal Reserve Bank of San Francisco for six years, and was an economist with the Fed before that. She also served on President Clinton’s Council of Economic Advisors. She has also spent time in academia as a professor at the University of California, Berkeley.
Why Should I Care?
The Fed is playing a big role in the economy right now, using an unconventional stimulus program called quantitative easing that keeps money flowing in the economy and many feel has helped to boost the sluggish recovery. It also plays an important role in financial regulation at a time when the details of the Dodd-Frank financial reform bill are being worked out, and the Fed also has to keep an eye open for signs of any bubble or looming financial crisis. And its “dual mandate” is to keep an eye on both inflation and unemployment, making sure neither rises too high.
There’s been a big debate over whether quantitive easing should continue or whether the Fed should start “tapering” the program. Yellen appears poised to continue the program. Yellen also does not seem to be overly focused on inflation at the expense of combatting unemployment. The fear of inflation often pushes the Fed to focus on just that issue, but back in 1996 she convinced Alan Greenspan, then the Fed Chairman, that targeting zero inflation was a bad idea. She has also prioritized the Fed’s ability to increase employment. And when it comes to spotting the next crisis, Yellen has a solid track record, beating out all Fed policymakers analyzed by the Wall Street Journal. When she underestimated some of the impact of the housing bubble, she was able to learn from the mistake and change position.
On financial regulation, she backed the repeal of the Glass-Steagall Act in the 1990s, a law that separated commercial banking and riskier trading, which many have said was a factor in banks becoming more reckless in the lead up to the crisis. It seems she may have changed her mind since then, however. She has said that the financial crisis pushed her from being a “docile” bank regulator to being “strongly inclined…toward tougher standards and built-in rules that will kick into effect automatically when things like this happen.”