Yesterday, the Senate voted 56-26 to usher in Janet Yellen as the next Chair of the Federal Reserve.
Yellen’s acceptance came as no surprise, especially seeing as she was easily approved by the Senate Banking Committee in November. Yellen is the first woman to ever head the Federal Reserve and is expected to continue the country on the path it has been traipsing since the beginning of the “Great Recession” 8 years ago.
Yellen will officially take office on February 1, after Ben Bernanke’s term is officially over. Bernanke’s shoes will be hard to fill due to the unique situation the Federal Reserve finds itself in at the current moment. In order to abate an impending economic collapse, the Federal Reserve has been investing $85 billion per month in a bond-buying program. This program was intended to push money into the US economy, driving down interest rates on loans and spurring investment and spending from consumers.
However, Bernanke’s bond-buying program has come under much fire from the GOP, where many politicians insist that continuing the program “risks fueling an economic bubble and even hyper-inflation,” potentially leading to “real and lasting damage to our economy.” Senator Rand Paul has perhaps been the Fed’s most outspoken opponent, recently stating that the policies of the Federal Reserve have destroyed “97 percent of the dollar, along with millions of jobs” since its inception.
However, Yellen has already shown that she is willing to work with both sides of the political spectrum, recently voting to ease the quantitative easing program of the Federal Reserve from $85 billion per month to $75 billion, a move which presents dangers in itself: If Yellen eases the program too quickly, it could worry potential investors and lead to withdrawal from the markets and increased interest rates; if she moves too slowly, more “bubbles” could appear in the economy, leading to constant fear that said bubbles may burst: “There are dangers, frankly, on both sides of ending the program or ending accommodation too early. There are also dangers that we have to keep in mind with continuing the program too long or more generally keeping monetary policy accommodation in place too long,” Yellen told Senators during Congressional confirmation hearings in November.
While most politicians are worried about the logistics of the Fed’s bond-buying program, Yellen will most likely spend her time worrying about how to decrease the unemployment rate. During all of her time as a student, a professor (at UC Berkeley, Harvard, and the London School of Economics), and a policymaker, Yellen’s primary focus has been on unemployment. Yellen has been termed “dovish” on monetary policy, meaning she is willing to let inflation rise if it brings about higher employment more rapidly.
After her confirmation, President Obama championed Yellen as the next Chair of the Federal Reserve, stating, “The American people will have a fierce champion who understands that the ultimate goal of economic and financial policy making is to improve the lives, jobs and standard of living of American workers and their families.” Obama originally nominated Yellen following the withdrawal of his initial nominee, Larry Summers, and at the behest of economists across the world.
Image via Wikimedia Commons
