January 6

Senate confirms first woman to ever lead Federal Reserve

Janet Yellen, who chaired Bill Clinton’s Council of Economic Advisers, will replace Ben Bernanke.

By Alan Fram
The Associated Press

WASHINGTON – The Senate confirmed Janet Yellen on Monday as the first woman to lead the Federal Reserve, elevating an advocate of fighting unemployment and a backer of the central bank’s efforts to spur the economy with low interest rates and massive bond purchases.

click image to enlarge

Janet Yellen, who as an academic has focused on unemployment and its causes, is considered a “dove” who wants the Fed more focused on creating jobs because unemployment is high and inflation is low.

2013 Associated Press File Photo

Yellen, 67, will replace Ben Bernanke, who is stepping down after serving as chairman for eight years dominated by the Great Recession and the Fed’s efforts to combat it.

Senators confirmed her by 56-26, with numerous absences caused by airline flight delays forced by arctic temperatures around much of the country. All 45 voting Democrats were joined by 11 Republicans, including Sen. Susan Collins of Maine, in supporting Yellen, while 26 Republicans voted “no.” Sen. Angus King, I-Maine, was among those absent because of the weather.

After several flight delays and cancellations, King traveled south by train but arrived in Washington after the voting had ended, his office said Monday night.

King was an early supporter of Yellen and said he would have voted to confirm her.

Vice chair of the Fed since 2010, Yellen begins her four-year term as leader of the century-old bank on Feb. 1. With the economy rebounding from the depths of the recession but only modestly so far, many economists expect her to focus on how to nurture growth without putting it into overdrive, which could risk fueling inflation.

“The big debate will be when the Fed should tighten and how much, rather than when to step on the gas pedal and how hard,” predicted Bill Cheney, chief economist for John Hancock Financial Services, who envisions a growing economy this year.

Under Bernanke, the Fed has driven short-term interest rates down to near zero and flushed money into the economy with huge bond purchases, which it has just started to ease. Yellen, a strong Bernanke ally, has supported those policies and is expected to continue them until concrete signs emerge of sustained improvement of the economy and job market.

A native of Brooklyn, N.Y., Yellen previously headed the Federal Reserve Bank of San Francisco, chaired President Bill Clinton’s Council of Economic Advisers and has been an economics professor at the University of California at Berkeley.

Yellen, who as an academic has focused on unemployment and its causes, is considered a “dove” who wants the Fed more focused on creating jobs because unemployment is high and inflation is low. “Hawks” on these issues prefer a stronger emphasis on preventing inflation.

In brief debate on her nomination, Sen. Sherrod Brown, D-Ohio, lauded Yellen, who was one of the first to warn in 2007 of a housing bubble that could burst and damage the entire economy.

“She understands how risky financial practices deep inside the largest Wall Street banks can have a terrible and terrifying impact on American families,” Brown said.

But Sen. Charles Grassley, R-Iowa, criticized Yellen for supporting the Fed’s “easy money” policies of low interest rates and bond purchases.

“No one can deny that the risks are real and could be devastating” if those policies continue for too long, Grassley said.

Yellen’s GOP critics have said the Fed has inflated stock and real estate prices by pumping money into the markets, creating investment bubbles that could burst and wound the economy anew.

Some also warn that as the Fed starts to trim its bond holdings, it could spook financial markets, threatening the economy’s recovery by causing stock prices to drop and interest rates to rise.

Last month, the Fed announced that it will start gradually reducing its $85 billion in monthly bond purchases, trimming them back initially to $75 billion this month and taking “further measured steps” as economic conditions improve.

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