Janet Yellen’s Nomination To Head The Fed Draws Many Reviews
Late Tuesday the news began to ripple across Washington and Wall Street that President Barack Obama planned to announce his selection of Janet Yellen to head the Federal Reserve Board on Wednesday afternoon.
It did not take long for reactions to come in. The Wall Street Journal offered a brief round up of initial reaction from economists to Yellen’s nomination.
Initially, foreign markets had a muted reaction as both the yen and the franc fell after reports leaked that Obama had settled on Yellen.
“Yellen’s policy stance is very similar to Bernanke’s, or seen by some as even more dovish than him. A dovish Fed would keep a lid on U.S. yields,” Shinichiro Kadota, a foreign-exchange strategist at Barclays Plc in Tokyo told Businessweek.
Like Bernanke, Yellen shares a concern that unlike after previous recessions, a new class of the long-term unemployed has emerged. This view was expressed in an April 2012 speech in which Yellen noted her concern “that individuals with such long unemployment spells could become less employable as their skills deteriorate and as they lose their connections to the labor market. This outcome does not appear to have occurred in the wake of previous U.S. recessions, but the fraction of the unemployed who have been out of work for a long period is much higher now than it has been in the past.”
Yellen Receives Praise
Among those welcoming Yellen’s selection was Owen Ullman of USA Today, who has written a positive profile of Yellen which promotes the idea that she is battle-tested and would be able to handle a crisis as well as her Larry Summers, who also was under 01consideration for the position.
During the financial crisis, Yellen served as president of the San Francisco Fed acting as “a leading voice in setting the central bank’s policy” during the 2008 financial crisis.
“Yellen was prescient in arguing in late 2007 that the financial system was headed for danger and later prodded the Fed to take extraordinary measures to bring the world economic system back from the brink of collapse.
“Even as some Fed members were downplaying the crisis and worrying about inflation, Yellen made a strong case for it to continue its unprecedented stimulus programs because the economy was too weak to stand on its own,” he maintains.
Forbes’ Bill Connerly has a similarly favorable look at the first woman tapped to head the central bank.
And Yellen Receives Criticism
Connerly’s colleague John Tamny, however, is not as happy about the nomination, a view that should not be surprising as Tamny is critical of Bernanke.
“All entrepreneurs and businesses know that businesses can’t start or expand, and certainly can’t hire without investment, yet Bernanke and Yellen both support the explicit devaluation of money which repels the very investors so essential if Americans are to experience a full economic recovery. Of course the mere mention of ‘economic recovery’ perhaps does the most to explain why we never experienced a real one under Bernanke, and why we won’t enjoy one under Yellen insofar as Yellen’s meddling hand resembles Bernanke’s,” argues Tamny.
The Fed may not be influenced by political winds, but politics definitely influenced her selection, which has been seen as a thumb in the eye of congressional Republicans.
Senate Banking Committee Member Bob Corker expressed qualms he has about the Yellen nomination, but also said he expected her nomination to be approved.
What Does The Fed Do?
Binyamin Applebaum of The New York Times has a short item about what the Fed can do and what is beyond its policy scope.