Thursday morning, the Senate Banking Committee approved Janet Yellen’s nomination to become the next Chair of the Federal Reserve by a 14 to 8 vote. This vote comes as no surprise to political pundits, especially seeing as Democrats hold 12 of the 22 seats on the committee and Yellen has been supported by Democrats and Republicans, alike, before the vote took place.
In early October, Barack Obama announced Janet Yellen as his nomination to replace Ben Bernanke as Chair of the Federal Reserve when his term ends on January 31, 2014, and for good reason. Currently, Yellen holds the position as vice-chair of the Federal Reserve. Before her current role, Yellen had served as the President and Chief Executive Officer of the Federal Reserve Bank of San Francisco and as an economic adviser during the Clinton administration. Not only does Yellen have the pedigree to make her an appropriate candidate for the next chair of the Fed, but over 350 economists sent a letter to President Obama earlier this year voicing their approval of Yellen as the next nominee for Fed chair.
Despite her credentials, however, many Republicans had voiced their opposition to her nomination. Republican Senator Marco Rubio, of Florida, has expressed his doubts that Yellen has the right monetary policy to lead the Fed during the current US financial situation: “She has championed policies that have diminished people’s purchasing power by weakening the dollar, made long-term savings less attractive by diminishing returns on this important behavior, and put the US economy at increased risk of higher inflation and another future boom-bust.”
Senator Mike Crapo of Idaho, the ranking Republican on the Senate banking committee, also voiced concern about Yellen’s continued support of the US bond-buying program: “The long-term costs of these policies are unclear and, frankly, worrisome. The immediate benefits are questionable and markets have become too reliant on monetary stimulus.”
While most Republicans have apprehensions and disagreements with how the Federal Reserve is handling the financial situation of the US, Yellen is most likely going to win nomination while continuing the same policies as her predecessor, Ben Bernanke. Yellen is described as a “dove”, meaning that during times of financial crisis, she will bolster Fed policies that fight against unemployment and attempt to drive spending. Conversely, Republicans would like to see a Fed chair who was a “hawk”, one who would focus more on suppressing inflation than worrying about unemployment.
The biggest concern of Republicans, however, deals with the Fed’s bond-buying program. As it currently stands, the Federal Reserve purchases $85 billion of government bonds per month in an effort to drive down interest rates and encourage loans and investments. Republicans, as Senator Crapo expressed in the statement above, are worried that these investments are artificially driving-up the price of stocks and will soon result in a bubble-burst similar to the 2008 financial crisis.
Democrats, and some Republicans (such as Bob Corker of Tennessee, Mark Kirk of Illinois and Tom Coburn of Oklahoma – who voted for Yellen’s nomination on the Senate banking committee, and Susan Collins of Maine, Orrin Hatch of Utah and Lisa Murkowski of Alaska – who have voiced that they will support Yellen’s nomination), point toward Yellen’s proven track record of intellect and success as the reasons as to why there should be no issues concerning her nomination: “She has devoted a large portion of her professional and academic career to studying the labor market, unemployment, monetary policy, and the economy. As we saw in her testimony last week, Dr. Yellen understands the challenges facing our economy and the balance the Fed must strike as we navigate the path back to full employment,” stated Senate Banking Committee Chairman Tim Johnson (D-S.D.).
Due to her current role as vice-chair of the Federal Reserve and bipartisan support, Yellen should receive the 60 votes necessary to secure her position as the next Chair of the Fed (especially if Harry Reid is successful in changing the rules to make 51 votes the number required to secure nomination). If she is successful, Yellen will become the first woman to head the Federal Reserve since its inception over 100 years ago, a move which would be another huge step toward incorporating more women within politics in Washington, DC.
What do you think? Is Yellen the appropriate candidate to become the next Chair of the Federal Reserve? Let us know in the Comments Section below.
[Image via Wikimedia Commons]