Yellen, a respected academic and longtime member of the Fed in one capacity or another, believes in the power of monetary policy to help the economy weather storms and reduce the sting and longevity of recessions. She's seen by investors as someone who is likely to reduce only slowly the Fed's asset purchases – a procedure that's come to be called "tapering." That's something the stock market likes. In September, stock prices soared after Larry Summers, presumed front-runner for the Fed chair nomination and someone who had hinted at a faster taper, withdrew his name from consideration.
Yellen believes that tapering, when it does happen, should be closely tied to the performance of the labor market, in part so that the Fed's actions will be more understandable and transparent to the general public. “In my view, adjusting the pace of asset purchases in response to the evolution of the outlook for the labor market will provide the public with the information regarding the [Fed's] intentions and should reduce the risk of misunderstanding and market disruption as the conclusion of the program draws closer,” Yellen said in a speech in Washington in April.
So, who is Janet Yellen? Before becoming the Fed's vice chairman, an office she has held since 2010, Yellen was president and CEO of the Federal Reserve Bank in San Francisco, which she guided through the early days of the Great Recession. She also served as chairman of the White House Council of Economic Advisers under President Clinton and is a respected academic. She has been a professor (now emeritus) at the University of California at Berkely's Haas School of Business since 1985 and won the school's outstanding teaching award twice. She is married to Nobel-prize winning economist George Akerlof, with whom she has written several academic papers.
As a Fed nominee, Yellen is popular with Democrats but also has the backing of Republicans, including Sheila Bair, former chairman of the Federal Deposit Insurance Corp. In a recent op-ed for Fortune magazine, Ms. Bair advised the GOP to get behind Yellen's nomination or face the political consequences. "Opposing her would be harmful to the party," Bair wrote. "This will be an historic nomination. She would be the first woman to head the Federal Reserve.... Nothing in her past suggests harmful financial conflicts or lapses in ethical judgment. On the contrary, she has demonstrated good judgment and principled conduct throughout her life. And by blocking her, the GOP will risk the public perception that they oppose her because she is outside the male-dominated Wall Street club."