10th Oct 2013

Yellen: the first female Fed chief?

Yesterday President Barack Obama nominated Janet Yellen to replace Ben Bernanke as head of the Federal Reserve. If endorsed by the Senate Yellen will be the first woman ever to lead the US Federal Bank, and the first woman to hold arguably the most important job in world finance. Yellen - currently vice chairwoman of the central bank - became a favourite for the position after Larry Summers’s very public withdrawal from consideration in September.

Brooklyn born Yellen, who studied at Brown and Yale, is a Fed veteran. Her first stint with the Federal Reserve was as a staff economist in the late 70s, she was on the Board of Governors in the 90s and she was president and CEO of the Federal Reserve Bank of San Francisco from 2004 to 2010. She has served as Bernanke’s deputy since 2010, becoming one of his closest allies on the FOMC (Federal Open Market Committee).

As one of the few top economists to forecast the collapse of the US housing market before the financial crisis, Yellen is an expert whose clear thinking and understanding of the financial system is highly respected.

But, Yellen has garnered a reputation as a ‘dove’ (in Fed lingo a ‘dove’ is typically someone whose concerns are more focused on unemployment than inflation) for her efforts to stimulate the economy back to full employment without worrying about the threat of inflation. At a conference this year she explained “long-term unemployment is devastating to workers and their families”.

So, Yellen’s nomination may face resistance from members with so-called ‘hawkish’ tendencies – those who worry about the risks of high inflation. As a standoff about raising the US debt ceiling takes full swing, Yellen’s nomination comes at a critical time.

Ben Bernanke has been Fed chairman during some of the bumpiest times in US economic history, serving as chief since 2006. He has large shoes to fill. Even prior to Bernanke’s re-nomination in 2009, Yellen’s name was mentioned as a potential successor. 

Senator Tim Johnson - who heads the Senate banking committee - is keen to approve Yellen’s nomination, saying in a statement, “She has a depth of experience that is second to none, and I have no doubt she will be an excellent Federal Reserve chairman.” This time round, Yellen is expected to secure the 60 votes she needs.

HIlda Goold

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