The New York
Times is reporting that, weather permitting, the Senate may vote Monday
night on the nomination of Janet L. Yellen to lead the Federal Reserve. The confirmation of Yellen, currently the Fed’s
vice-chairwomen would be historic as she would become the first woman to head
the central bank in the U.S. although a number of women have held such
positions in other countries. She would
also be the first Democrat Chairman since Paul Volcker was picked by Jimmy
Carter in 1979.
If confirmed Yellen will replace Ben Bernanke who
has served two terms as Fed Chairman after being nominated by George W.
Bush. Yellen has been a close ally of
Bernanke and supported his accommodative monetary policies but did join with
all but one of her colleagues in a December policy vote to begin winding down
the Fed’s asset purchase program.
A macroeconomist specializing in employment issues, she holds a Ph.D. in
economics from Yale granted in 1971. She graduated summa cum laude from Brown,
also in economics, in 1967 and was a member of the faculty at Harvard
University and is a Professor Emeritus at the University of California at
Berkeley where she was the Eugene E. and Catherine M. Trefethen Professor of
Business and Professor of Economics. She
became Fed Vice-Chair in 2010.
As MND reported at the time of her nomination by President Obama in October,
Yellen was among the first to warn of the dangers of a housing bubble, doing so
while President of the Federal Reserve Bank of San Francisco in 2005.
At that time she said there were several
reasons why monetary policy might not be the best tool to deflate that bubble. “For one thing, no one can predict exactly how
much tightening would be needed, or by exactly how much the bubble should be
reduced. Beyond that, a tighter policy to deflate a housing bubble could impose
substantial costs on other sectors of the economy that would lead to equally
unwelcome imbalances. Finally, it’s possible that other strategies, such as
tighter supervision or changes in financial regulation, would not only be more
tailored to the problem, but also less costly to the economy. Her bottom line, she said, was that monetary
policy should react to rising home prices or prices of any other asset “only
insofar as they affect the central bank’s goal variables-output, employment,
She also warned of a possible credit crunch and ensuing recession when the Board
of Governors met to discuss the looming financial crisis in 2008. The “shadow banking system was freezing up,
she said, and the economy was likely to slow significantly.
The Times said Yellen needs only
the votes of a simple majority of senators and no Republican support when the
vote is called. Several Republican
senators, notably Rand Paul (R, KY) had threatened to put a hold on her
nomination but that threat has apparently been lifted.