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Tag: Janet Yellen

  • Federal Government Will Not Bail Out Silicon Valley Bank

    Federal Government Will Not Bail Out Silicon Valley Bank

    Silicon Valley Bank (SVB) shocked the industry when it collapsed Friday, leaving a plethora of companies in limbo.

    SVB was the 16th-largest bank in the US, making it the second-largest bank collapse in US history. The bank’s collapse has left many of Silicon Valley companies and startups scrambling to address cash-flow issues.

    The collapse has also sparked questions about whether the government plans to bail the bank out, much like it did in the crash of 2008. According to AP News, Treasury Secretary Janet Yellen threw cold water on the idea.

    “We’re not going to do that again,” she said, referencing past bailouts. “But we are concerned about depositors, and we’re focused on trying to meet their needs.”

    Some experts are concerned that SVB’s collapse could spark a run on other banks, leading to more collapses. After all, it was tech companies’ run on SVB — in an effort to stay solvent during the financial downturn — that led to SVB’s failure. Yellen tried to offer reassurance that the banking system was sound.

    “The American banking system is really safe and well capitalized,” she said. “It’s resilient.”

    In the meantime, deposits insured by the government should be available Monday morning.

  • Xiaomi Sues US Government In Effort to Overturn Ban

    Xiaomi Sues US Government In Effort to Overturn Ban

    Xiaomi is suing the US Treasury Department and the Department of Defense in an effort to overturn a Trump administration ban.

    Xiaomi, along with Huawei and ZTE, were banned by the Trump administration over national security concerns. Xiaomi was accused of having close ties with the People’s Liberation Army.

    The company is now challenging the ban, according to Bloomberg, suing the US Treasury and Defense departments.

    “Xiaomi faces imminent, severe, and irreparable harm if the Designation remains in place and the restrictions take effect,” the company said in its court filing, naming Defense Secretary Lloyd Austin and Treasury Secretary Janet Yellen as defendants.

    It remains to be seen what action the Biden administration will take against Chinese firms, and whether it will uphold past action. It’s clear, however, that Xiaomi is testing the waters to see if the the change of administration will result in a change of policy.

  • Janet Yellen to Make First Speech as New Fed Chair

    Janet Yellen, as the newly appointed Fed chair and first woman to ever hold the post, will make her first comments today before the House Financial Services Committee and then Thursday before the Senate Banking Committee.

    She has addressed these committees before as vice chair for three years and as a leading economist for a long time, but now she faces a whole new spotlight as she steps into the shoes of Ben Bernanke.

    What investors are anxious to find out is if Fed officials are going to hold fast to the message that the economy’s outlook is bright enough to withstand a slight pullback in their stimulus but that rates should stay low to fuel a shaky economy, according to Bloomberg.

    Her first address is important, because it will also give them a clue as to where she stands on their concerns about the economy and the job market, turmoil in global markets and uncertainty about her direction at the Fed. She has already stated that she wants the U.S. central bank to be known as a champion of Main Street, but does she have what it takes to see it through?

    “A new Fed chair’s first testimony is always a testing period,” said Diane Swonk, chief economist at Mesirow Financial.

    Yellen will most likely address many issues, including payroll and her likely intention to continue with the strategy to trim bond buying by $10billion, even though last month employer’s added only 113,000 jobs instead of the anticipated 180,000.

    “While the last couple of payroll readings have been disappointing, we do not expect this to change the currentcourse of asset-purchase tapering,” Joseph Lavorgna, chief U.S. economist at Deutsche Bank Securities Inc. and a former New York Fed economist, said. “We view the recent payroll weakness as temporary and likely to reverse.”

    She will also probably back further away from the The Federal Open Market Committee’s December statement that they probably won’t raise the federal funds rate until “well past the time” the jobless rate falls below 6.5 percent. It is reported that most panel members didn’t favor moving the threshold.

    It is also likely that she will announce her intention to continue Bernanke’s policy of holding the main rate near zero and gradually tapering monthly bond purchases.

    As groundbreaking as her first address is, there is sure to be relentless scrutiny and pleas from both sides of the aisle for the direction which the Fed should now take. Republican lawmakers will most likely try to persuade Yellen to ease up on the incessant regulation of financial institutions and to “be more aggressive in reversing” record stimulus, said David M. Jones, president of DMJ Advisors LLC, a Denver-based economic consulting firm, and a former Fed economist.

    On the other hand, Democratic lawmakers are sure to plea for Yellen’s help to over income inequality and persistent joblessness, Jones said.

    Sen. Sherrod Brown, Democrat from Ohio who spoke with her at length during the confirmation process said of her recently, “She understands — people that are sober-minded about this understand — that income inequality is bad for the wealthy, too. It’s bad for a long-term growing economy. She’ll be a Fed chair that gets out and sees the real economy more and talks to people.”

    These are just a few of the expected inquiries and responses that Janet Yellen will face right away in the beginnings of her term as Fed Chair, and she will likely have a hard time hearing pleas from every direction and playing it right down the middle with Fed policy, but whether or not she will be able to handle it remains to be seen.

    Image via youtube

  • Janet Yellen Confirmed as Next Federal Reserve Chair

    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

  • Mortgage Rates Fall Significantly, Surveys Show

    Mortgage rates fell to one of the most extreme lows this year during the week ending November 21. According to a national weekly survey by Freddie Mac, results concluded that declines in manufacturing growth (industrial products) lowered the rates by 0.1% last month.

    Freddie Mac chief economist Frank Nothaft spoke about the lowered rates after the results of said survey were released this week, indicating that the average rate for a 30-year fixed-rate loan was lowered to 4.22% this week. Last week, that same popular mortgage product was rated at 4.58%.

    Freddie Mac’s survey showed that the average rates on a 15-year fixed-rate loan were reaching 3.35% last week; this week, the 15-year term rates fell to 3.27%.

    Findings showed a downturn in the inflation rate, as well. Nothaft said that the ‘consumer price index saw its smallest increase since October of 2009.’ The year 2013 had seen mostly a rise in the rates, beginning in January with the 30-year fixed-rate loan being 3.34%. By August, that number had reached a high of 4.58%, according to CNN.

    Bankrate.com, however, had slightly varied results from Freddie Mac’s. Their findings showed that this week, the 30-year fixed-rate loan fell to 4.39%, whereas the previous week it was at 4.48%. Their 15-year fixed-term rates were also reduced, from last week’s 3.49% to 3.27% this week. They went on to show that adjustable mortgage rates – 5-year and 7-year terms – were also in decline this week.

    On May 1, the 30-year term fixed-rate was 3.52%, which would cost a borrower $900 a month for a $200,000 mortgage. With the current rate, that same loan would require a monthly payment of $1,000.

    The mortgage rates are not expected to change significantly anytime soon; the decline is presumed to have been caused by Janet Yellen’s comments last week at a Senate Banking Committee hearing. Yellen is the imminent replacement for current Fed chairman Ben Bernanke, whose term ends in January. According the International Business Times, Yellen has been clear in her support of the policies Bernanke has implemented during his time in office. She has indicated the she believes the ‘benefits of the bond-buying program continue to outweigh the costs, and the best way for the Fed to help overcome income inequality is through recovery of the job market.’

    No word yet on strategies for implementing that.

    Main image courtesy @federalreserve via Twitter.

  • Janet Yellen Approved for Fed by Senate Committee

    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]

  • Janet Yellen Nominated to Lead Federal Reserve

    As expected, President Obama announced Wednesday that he would be nominating Fed vice chairwoman Janet Yellen to lead the Federal Reserve. She would replace retiring chairman Ben Bernanke.

    “For nearly 8 years, Ben has led the Fed through some of the most daunting economic challenges of our lifetime…Against the volatility of global markets, he’s been a voice of wisdom, and a steady hand. At the same time, when faced with global economic meltdown he has displayed tremendous courage and creativity. He took bold action that was needed to avert another depressions, helping us stop the freefall, stabilize financial markets, shore up our banks, and get credit flowing again. And all this has made a profound difference in the lives of millions of Americans,” said President Obama of outgoing head Ben Bernanke.

    “A lot of people aren’t necessarily sure what the chairman of the Federal Reserve does, but thanks to this man, more families are able to afford their own home, more small businesses are able to get loans, more folks can pay their mortgages and their car loans. It’s meant more growth, and more jobs.”

    Of Yellen, Obama had this to say:

    “Janet is exceptionally qualified for this role. She’s served in leadership positions at the Fed for more than a decade. As vice chair for the past three years she’s been exemplary and a driving force of policies to help boost our economic recovery…she has a keen understanding of how markets and the economy work.”

    Obama called the nomination one of the most important economic decisions he’ll make as President, as the head of the Fed is one of the most important policy-making positions in the world.

    Before her appointment to the vice chair position, Yellen served as President and Chief Executive Officer of the Federal Reserve Bank of San Francisco, and before that the Chair of the White House Council of Economic Advisers under Bill Clinton.

    “While I think we all agree, Mr. President, that more needs to be done to strengthen the recovery, particularly for those hardest hit by the Great Recession, we have made progress. The economy is stronger and the financial system sounder,” said Yellen.

    The nomination comes at a time when the country is facing economic uncertainty as the government shutdown enters its second week and the countdown keeps ticking for Congress to act on the impending debt ceiling deadline.

    Images via Wikimedia Commons, YouTube

  • Obama Nominates Yellen To Fed Chief Position

    President Obama will nominate the Vice Chair of the Federal Reserve, Janet Yellen, to fill Ben Bernanke’s position as chairman of the nation’s central bank when Bernanke’s term ends on January 31st. The fact that Janet will be the first woman to head the organization especially in the middle of the present economic climate is being widely discussed and, in many cases, enthusiastically promoted.

    The Head of the Senate Banking, Housing and Urban Affairs Committee, Senator Tim Johnson, D-S.D., recently praised Professor Yellen’s skill and knowledge.

    “She has a depth of experience that is second to none, and I have no doubt she will be an excellent Federal Reserve chairman,” Senator Johnson said.

    Others have taken to Twitter in order to vocalize support for the sixty-seven-year-old University of California, Berkeley, professor.

    She has an impressive CV including serving as the president of the Federal Reserve Bank of San Francisco as well as her time teaching at the University of California, Berkeley. The following video gives a brief overview about her political viability for the newly appointed role in which she finds herself.

    In December 2007, Janet Yellen spoke about the important task banks faced to encourage financial growth in spite of reservations and hesitations.

    “If banks only partially replace the collapsed shadow banks or, worse, if they cut back their lending in anticipation of a worsening economy, then the resulting credit crunch could push us into recession. Thus, the risk of recession no longer seems remote, especially since the economy may well already have begun contracting in the current quarter,” Janet Yellen said.

    Her past expertise during the near financial breakdown of 2008 was instrumental in seeing the country through that difficult period. Her anticipated efforts to continue striving to lower unemployment and encourage economic growth will be critical for the nation’s future.

    The following video shows Janet Yellen speaking at the Haas School of Business, University of California, Berkeley, where her focus on “communication” serves as the crux in ensuring that “monetary policy” is sustainable.

    [Image Via Wikimedia Commons/ Courtesy of U.S. Government And Serves As The Official FRBSF Picture For Janet Yellen]

  • Larry Summers Withdraws Name from Fed Chair Debate

    In somewhat surprising news Sunday, Larry Summers has withdrawn his name for the discussion of who will replace Ben Bernanke as Chair of the Federal Reserve when his term ends in January. All signs seemed to point to Summers as Obama’s first choice to replace Bernanke, which is what makes the news surprising. However, Summers has recently come under much criticism for past actions and the push from economists and politicians alike has been for another candidate – Janet Yellen.

    In a letter sent to President Obama on Sunday, Summers stated that “I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration or, ultimately, the interests of the nation’s ongoing economic recovery.” Why would his confirmation prove so acrimonious? Summers’s appointment has come under much scrutiny from 3 Democrats who serve on the committee that would have to approve his nomination. These more-liberal Democrats find two main faults with Summers’s nomination: 1) Summers has a record of supporting deregulation in the US market; and 2) Summers has a history of being anti-feminist due to his relations with his female colleagues while serving as President of Harvard (A position he later resigned from due to increased tension and pressure from the faculty.)

    Summers served as the Secretary of the Treasury under Bill Clinton and has since developed a deregulatory reputation due to certain actions during this tenure. First, Summers supported the deregulation of derivatives, which means that he supported lessening the oversight on future contractual payments that were originally created to lessen the risk parties would take when selling or purchasing products. With less regulation comes greater risk, however, in speculation. Many people have argued that the deregulation of derivatives was a large contributor to the financial crisis of 2008 due to increased speculation on future prices from banks, hedge funds, and insurance agencies.

    Secondly, Summers supported repealing the Glass-Stegall Act, another action which many people believe helped the US crumble into the financial crisis in 2008. The Glass-Steagall Act was created under FDR during the Great Depression; It was an act which separated commercial and investment banking. By doing this, the FDIC was ensuring that the money individual placed into their checking or savings accounts would not be gambled with on the open market by banks. If a person wanted to invest their money into the open market and potentially reap the benefits of larger interest rates on their accounts, one could invest their money into an investment bank and let the market play out. The Glass-Steagall Act was eventually repealed under George W. Bush, which resulted in much market speculation by banks, higher interest rates, and potentially the housing and financial crises of 2008.

    The current front-runner for the position of Chair of the Federal Reserve, now that Summers has withdrawn, is Janet Yellen. Yellen obtained her PhD from Yale and has been working with the Federal Reserve ever since. She was recently nominated to serve as Vice-President of the Fed by Barack Obama. Yellen’s main focuses during her lifetime have been on interest rates, inflation, and unemployment. Summers not only has immense intelligence and vast experience on her side, but she also has the support of politicians and colleagues. The Democrats on the committee for approval of the Fed nominee have voiced their support for Yellen, and over 350 economists have signed a letter making a plea to President Obama to nominate Yellen as the next chair of the Fed.

    If Yellen was to become the next Chair of the Fed, it would be a monumental step for women in Washington. While President Obama has made pushes to include more women in Washington, Yellen would be the first woman to chair the Fed in its over 100 year history.

    What do you think? Is Yellen the best candidate for the next Chair of the Federal Reserve? Voice your opinion in the Comments section below.

    Image via Twitter