The challenges for Janet Yellen if she becomes the next Federal Reserve chair will require both the steely intellect and the personable style that many attribute to her.
Deciding when to slow the Fed's economic stimulus. Forging consensus from a fractious policy committee. Calculating the effects of any economic slowdown from Washington's budget fight. Facing volatile financial markets. Absorbing new members at the Fed.
First, though, Yellen will have to get there: She'll need to overcome Washington's toxic political environment and win confirmation from the Senate.
It's almost enough to make you wonder why she'd want the job, but a better question is....
Loading ...Yellen is widely seen as a "dove" on Fed policy: She stresses the need to use the Fed's tools to boost growth and reduce unemployment in the sluggish aftermath of the Great Recession, rather than worry about igniting future inflation.
In part for that reason, she's been outspokenly backed by many Democrats in Congress and opposed by some Republicans.
She wasn't President Barack Obama's first choice to lead the Fed. That was Larry Summers, a former Treasury Secretary and chief White House economic adviser who withdrew from consideration in the face of widespread opposition.
Brian Gardner, Washington political analyst for Keefe, Bruyette & Woods, predicts that Yellen, widely respected as an academic economist and veteran policymaker, will be easily confirmed' despite some Republican no votes.
Then the hard stuff begins.
Fed policymakers have been debating when and how to scale back $85 billion a month in bond purchases. The bond purchases are meant to spur economic growth by reducing long-term interest rates, driving up stock prices and encouraging borrowing and spending. Yellen was a key architect of this strategy.
Last month, the Fed surprised financial markets by deciding not to scale back its bond purchases. It concluded that that the U.S. economy wasn't yet healthy enough for the Fed to ease its stimulus even slightly. Fed officials also worried about the budget stalemate that's since led to a partial shutdown of the government and threatens to trigger a default on government debt.
Many analysts now don't think the Fed will reduce its stimulus before next year. And with the dovish Yellen as chairman, the Fed would likely be cautious about any pullback in early 2014.
For now, there's another problem, too: There isn't much official economic data to go on. The shutdown that began Oct. 1 forced the Labor Department to cancel its all-important jobs report for September. It's still unclear when the jobs report will come out.
The choice of Yellen to lead the Fed also comes amid worry and uncertainty about how much damage the shutdown might cause a fragile U.S. economy. Graver yet is fear that lawmakers won't raise the government's borrowing limit this month. If they don't, the U.S government could eventually default on its debt. Another recession and financial crisis could follow.
As chairman of the Fed, an independent agency that steers clear of Congress' affairs, Yellen can be little more than a spectator.
"There's really nothing she could do about the debt ceiling," notes Joseph Gagnon, senior fellow at the Peterson Institute for International Economics.
Yellen would also take over the Fed at a delicate time for China, the world's No. 2 economy after the United States, and other developing nations.
The International Monetary Fund, citing slower growth in China, India and Brazil, this week reduced its forecast for global economic growth to 2.9 percent this year and 3.6 percent in 2014. Both are 0.2 percentage point weaker than the IMF's previous forecast in July.
Investors have been pulling money out of developing markets, partly to take advantage of rising interest rates in the United States. The Fed might be called upon to help calm worldwide financial volatility.
"The role of the Fed chair is so critical," says Greg McBride, senior financial analyst at Bankrate.com. "We're not just talking about the U.S. economy. We're talking about the global economy."
Yellen will also have to establish herself as chair at a time when the Fed is experiencing unusual turnover. When Bernanke leaves Jan. 31, but there could be up to four vacancies that Obama would need to fill on the seven-member Fed board.
One board member, Elizabeth Duke, left in August. Another, Sarah Bloom Raskin, has been nominated by Obama to become deputy Treasury secretary. The term of a third, Jerome Powell, will be up Jan. 31, though he can remain on the board until a successor is confirmed by the Senate.
And Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, has announced that she will leave early next year.
Most analysts say they're confident Yellen can handle the many challenges.
She's "a good choice," McBride says. "You want your Fed chairperson to be cool, calm and collected and a steady hand. Yellen is certainly that."
(AP:Washington)
The federal reserve should be nationalized, its assets taken over by the treasury, and its income assigned to federal purposes. The gold the treasury then holds should be revalued to assure 100% backing of the existing money it has printed, and we should return to observing the Constitution regarding money. Since we would then need no federal reserve board, Ms. Yellen could seek other employment; I am sure there would be many offers, since our economy would then boom.
Should be and does she want to inherit that mess are two different things. 🙂
HHmmm, just ask also, why should Bernacke resign? Is he a Republican? Indeed he is. When Obama wants him to step down, than this is maybe because of political reasons.
IMO, he has done a pretty good job. The has done what every econom would have done, and he did it after counceling the FED's Board. So my guess is, that he became even a problem within his own party collegues, because his decision were mostly in-line, what Democrats wanted. But his decision were not based on what Democatrs wanted, it was based on what economy wanted. Maybe Obama does him a favor, because he is in trouble between economically-based decision, and ideological reasons to be in-line with Republican policy.
http://blogs.reuters.com/macroscope/2013/03/11/is-ben-bernanke-becoming-a-closet-democrat/
So if you ask mw, I would grant him his job also for a longer time.
She is the woman for the job, and has the ink ready. Print baby, print!
I do not know much about Yellen, she has to be partially brain dead to even want to set foot into the septic tank she is about to enter. Knowledge of the Fed.'s secret, corrupt, and insidious beginnings is becoming commonplace in most advanced societies. Yet the spinless creatures that are "nesting"
on the hill have yet to zero in on the number one cause of most of our national troubles, balancing
the budget. Occasionlly a news analyst, or economics doctorate talking head will mention it like it's a wart on your neighbors butt, seldom with emphasis placed on the fact that the us is broke.
Government agency's are stupid, most everything they touch turns into a black hole. I know several
individuals in my neiborhood that are ablebodied yet make false claims to get free rent, food, and many other items far beyond survival mode lifestyle, all on the backs of taxpayers.
Several others are makeing plans in the months ahead and into 2014 to organize self contained communities free from the financial, food, power grid.
Are you aware that the deficit has been cut in half since Bush Jr's last budget year?
Both parties are corrupt. We've added more to the debt in one Obama presidential term than the entire Bush two terms. The problem is that the debt doesn't have Bush's or Obama's name on it. Our name is on the debt.
Why have we added 7 trillion to the debt under Obama? Why won't we make our leaders accountable on both sides and have them maintain a balanced budget?
I keep hearing liberals citing this. Please explain how
he cut it in half and yet it is growing like wildfire?
impossible to cut without losing O care, or editing
that unwieldy bill..that will throw us above 20T.
also entitlements continue to grow. please explain
how you figure he has cut the deficit in half...yet it
is double!!
Actually, that rumor is being widely circulated by the administration. Unfortunately, it is unlikely to be true, and certain to be temporary if it is. There is a temporary increase in receipts this year because the tax increase has spurred repositioning by the public, however, that is a one time event. The addition of Obamacare entitlements together with the deepening economic malaise is certain to make the situation worse next year than this. In any event, comparison to the 2008 situation is like comparing apples and oranges. Hopefully the more correct comparison several years after a serious economic collapse is to the deficits which are the norm in a stable growing economy in normal peacetime circumstances; that seems impossible during an Obama administration since those circumstances cannot exist on his watch.
I said YES she is a great choice, it will allow all precious metals to rise, USD to fall and stocks to go higher, setting it up for some easy money to be made.
"Order more printing presses so we can print more money " Yellen was yellin has she stepped into her new office at the FED.
Precious metals will only rise, when fears for a crash come back. IMO, it will depend a bit on political negotioations about the fiscal budget. But at all, the horror scenarios won't happen. America's economy is in rather stable condition, shutdown of government will end, when they have agreed to a new budget
This nominee has been quoted that she did not see the housing bubble coming, and has no plans to taper the the Fed bond buying. This might be good for the stock market in the short term but in the long run I feel she'll be too incompetent to see the next crisis coming which will be the collapse of the dollar and a financial collapse that will make 2008 look mild.
She will not do things which will be against desicions of the FED's board.
Does it really matter anyway who takes over. We have crossed the Rubicon. It won't be long before the bankers collapse the entire global economy. There is no way out of this mess. Next they are going to steal our pension and retirement funds. Yes we can, yes we can, yes we can .....rob you blind !!!!
Sure there is a way out. FDR started in an environment worse than this one and tripled the size of the economy in 12 years. That is more than under all the republican presidents of the last century combined! The simple trick is to notice that economic stability decreases as interest rates and return on investments go to zero and those two both happen when the rich end up with all the money. If you just tax the rich or create a small business friendly environment (which by definition is the opposite of a large business friendly environment) enough to sop up some of the imbalances then you fix the economy. Reagan showed us in the 1980s that not only does redirecting spending to tax breaks not help the economy for a right-leaning economy like ours, but even continuing to spend like before and financing tax breaks out of government deficits still does not help, which should be a shocking revelation to any honest neoclassical economist.
I'm sure you think of yourself as a pacifist, but you forgot something. The FDR 'bailout' required a world war and a global military buildup and expansion to complete. That's a dangerous precedent to follow.
Jeff, puhleeze don't use the vague term "rich". I have no problem with taxing very heavily the banksters who are benefiting from this monetary charade, and folks like President O and the Clintons, who have never earned a dime, and have gone from nothing to skimming millions a year off the top from campaigning jobs, charities and cattle trading. Unfortunately, that is not the intention of the banksters and their lackeys in the Congress. They will print lots of money, and then call anyone who has over 200K rich, even if they can't pay their rent with such a sum. Because they are not indexing ANY of the taxes, and the banksters all have their money where tax laws don't reach it. Or, like Geithner, they just won't pay, and the administration will waive the law for them (do you think they will waive the law for you?). Folks with small businesses are getting nailed as "rich", and they work like dogs to get what they have. But the problem outside of the special situations and the banksters is not with taxes, it is because our SPENDING is 'way too high, for no logical reason. We have the feds involved in things they cannot do well at all. Virtually all governmental efforts are better performed at the state level, or locally, and the very idea that the feds should get involved in something that the state is not doing (or doing poorly) ought to set everyone on fire with anger. If it can't or shouldn't or isn't being done locally, the idea that it can or should be done in DC should be really scary. I guarantee you nobody in DC is smart enough to treat a hangnail in my state, much less a more complicated medical problem. The idea that we should be handling medical problems from DC is insane; how could ANYONE, no matter how stupid, think their medical care would be better, cheaper or more timely handled in DC than if handled by their doctor in their home town? When are folks going to wake up and get rid of these gangsters (whom I have heard today are evicting people from their own homes if the land underneath the home was leased to the builder or the owner by the federal government). That's right, they have the money to send folks out to break leases and evict people illegally, and enough to play golf, but no time to discuss how to settle disputes with folks who are worried about excessive spending.
Of course, anyone stating that Janet Yellen is Jewish would make that person an anti-semite. Looking back through history reveals that past Fed Chairmen are predominantly Jewish, whether under Democrat or Republican administrations. Pointing out the obvious is a scarey thing these days. These wizards of money are actively looting our treasury by creating money out of thin air and charging tax payers interest on the debt. That money doesn't go back into the Treasury, it goes to needy places like big banks, Wall Street rip-off firms, international banks, the European Central Banks (to prop up their failure), the IMF and others. As evidenced in this poll, most people applaud the choice, perhaps through ignorance, but I suspect their exuberance comes from the ascention stocks to unrealistic highs while our county and this civilization joins the Roman Empire in the wanton self-destruction, with the approval of its citizenry. Rejoice, Janet!!!!!
I can't understand your pessimistic thoughts about the work of FED. Neither Bernacke nor Jellen will do things, that is not in-line with the requirements of needed money policy right now.
Not pessimism, just reality. Obviously, some would benefit knowing how the Fed and fractional reserve and crony capitalism, bank money laundering, terrorist funding all stem from this corrupt system. When the failure comes, most will be trying to pull up their pants. Suspenders, baby!
On what I want to point out, is, that FED's money policy does not necessarily depends on who is chair man/woman. Thus I guess Mrs. Jellen will do her job in the same way, as it has been done by Bernacke.
I listened to the Senate hearings last night on the debt ceiling. It was sickening - they were equating a raise in the debt ceiling (or credit limit) to fiscal responsibility. If one was not listening closely, one would mistakenly assume that they all supported paying down the debt when in fact they were arguing for removing the House-voted ceiling entirely and promoting limitless debt. Lies and deception that will take us to our economic knees.
When we pass 20 Trillion in national debt in 2016, we'll be sure to come to you for your 'needed' contribution to service the interest on that debt.
So do you sign up to buy a new boat without qualms and then get mad and start negotiating when the bill comes? The correct solution is not ruining your credit by stopping payments. That is clearly irresponsible. The correct solution is to either increase your income so you can make the boat payments or to not buy the boat in the first place.
The idea of calling up the person who sold you the boat and saying, "sorry, but this pushes me over my monthly allocated expenses so you won't get paid" is clearly ridiculous and it is what the Republicans are doing here.
Also, you should be aware that we can make a lot of progress in a way that helps the economy by repealing the tax cuts that have interestingly enough slowed growth even without cutting total spending.
You are confusing debt limit with paying debt. They are absolutely not the same.
We, as consumers, have a debt limit called credit limits. Minimum payments service the interest on that debt. Different animals. What you are proposing is to buy a boat, buy a bunch of other things that make it hard to pay for that boat, then cry to the bank for a higher credit limit in order to be 'fiscally responsible'.
As consumers who budget for our households, we all know that is stupid and we are not falling for it.
Nobody is talking about not paying people the nation has bought things from; that is an administration lie (and far from the only one on this subject). O has the money to pay the bills he already has incurred, but he wants to spend still more. The debt limit is supposed to keep him from doing it. The Senate has refused to pass a budget since he became president, so he is just spending whatever he wants, and the ONLY restraint that exists on him is the debt limit. WE HAVE TO REPAY THAT DEBT EVENTUALLY, ONE WAY OR ANOTHER. OR OUR KIDS DO. If O gets a blank check, NO ONE is going to like the result.