Janet Yellen confirmation marks new era at Federal Reserve

The Janet Yellen confirmation breaks a glass ceiling for women at the Federal Reserve and also comes at a time when the nation's central bank is under intense scrutiny.

|
Gary Cameron/Reuters/File
Janet Yellen, here addressing the 29th National Association for Business Economics Policy Conference in Washington in this file photo, won Senate confirmation on Friday.

Janet Yellen won a confirmation vote in the US Senate Monday, setting her on track to become the next Federal Reserve chair and to guide the central bank’s policymaking through a new and challenging economic era.

She’ll be the first woman ever to hold the job. She’s also viewed as unusually well prepared for the role, having served on the Fed’s governing board, heading one of its regional banks and, most recently, serving in the No. 2 seat next to outgoing Chairman Ben Bernanke.

But when Vice Chair Yellen takes the reins later this month, it won’t be a time for resting on her accomplishments.

The nation’s unemployment rate stands at a 7 percent, down from its post-recession peak but still an uncomfortably high level affecting millions of US workers.

The Fed, meanwhile, has ballooned its portfolio of bond assets to some $4 trillion in an effort to support the economy’s recovery by adding downward pressure on long-term interest rates. It also brought short-term interest rates to historic lows near zero percent.

Yellen was confirmed with a 56-to-26 Senate vote early Monday evening, with the substantial number of “no” votes, symbolizing how the Fed’s role has come in for greater scrutiny and criticism in recent years.

Where many economists say the Fed’s efforts did much to steer the economy out of recession, the US central bank is not particularly popular with the American public.

Yellen’s task, as many economists see it, is to navigate a careful and gradual transition – keeping pressure on the monetary throttle to help the job market get back to normal, while also setting the stage for the Fed’s own monetary policy to get back to normal, too.

It may go smoothly. For now, labor conditions are improving, US stock indexes have been finding record highs, and inflation is modest. But there’s no guarantee, and the route ahead looks more difficult than what the Fed tries to chart in more typical times.

Yellen’s job will also be, in part, to try to build the Fed’s brand as an institution serving all Americans, not just power brokers on Wall Street or in Washington.

When senators held a hearing on the Yellen nomination back in November, she left little doubt that she sees her first mission as continuing to promote healthy growth.

“Unemployment is … still too high, reflecting a labor market and economy performing far short of their potential,” she said in her prepared testimony. “I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.”

That more normal approach by the Fed would include higher short-term interest rates (perhaps starting some time in 2015), gradually winding down a campaign of monthly bond purchases (something the Fed just began to do at its December policy meeting), and ultimately shrinking the Fed’s bond portfolio.

At the same time, another key to providing a stable economic climate has nothing to do with interest rates or “quantitative easing” (the bond purchases). Rather, it has to do with regulating and supervising financial firms.

Yellen and her colleagues at the Fed are part of a new oversight system, put in place after 2008, designed to guard against a new financial crisis in the banking system.

President Obama said Monday evening that his nominee is up to this job of fostering a stable financial system, and that she’ll strike a sound balance in monetary policy.

“Janet is committed to the Fed’s dual mandate of keeping inflation in check while also addressing our most important economic challenge by reducing unemployment and creating jobs,” Mr. Obama said in a statement issued by the White House.

Some Republicans have voiced worry that the Fed’s policies will open the door to a resurgence of inflation or promote price bubbles in assets like stocks or real estate.

On the left, support for Yellen has been solid (she’s a Democrat).  And some Republicans joined Democrats in supporting her nomination on a day when a number of senators were absent.

Yellen grew up in New York's Brooklyn borough and taught for years at the University of California, Berkeley, before taking a succession of policy roles at the Fed.

Neera Tanden, president of the Center for American Progress in Washington, said in a statement released after the confirmation vote that “as the first woman to run the Federal Reserve, Janet is breaking yet another glass ceiling in an arena full of gender barriers.”

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Janet Yellen confirmation marks new era at Federal Reserve
Read this article in
https://www.csmonitor.com/USA/Politics/2014/0106/Janet-Yellen-confirmation-marks-new-era-at-Federal-Reserve
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe