October 9, 2013

Obama to nominate first woman to head Fed

Janet Yellen would succeed Ben Bernanke as chairman of the nation’s central bank.

By Jim Kunhenn And Martin Crutsinger
The Associated Press

WASHINGTON – Capping a lengthy and politically charged search, President Barack Obama will nominate Janet Yellen, the Federal Reserve’s vice chair, to be chairman of the nation’s powerful central bank, succeeding Ben Bernanke at a pivotal time for the economy and the Fed’s monetary policies.

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Janet Yellen is regarded as having a “nuanced understanding” of job markets and is known as a policymaker who considers all points of view.

The Associated Press

If confirmed by the Senate, Yellen would be the first woman to head any country’s major central bank anywhere in the world. She also would be the first Democrat chosen to lead the Fed since Paul Volcker was picked by President Jimmy Carter in 1979. France’s Christine Lagarde heads the International Monetary Fund.

Obama was scheduled to make the announcement Wednesday with Yellen and Bernanke at his side in the White House’s ornate East Room.

Bernanke, 59, will serve until his term ends Jan. 31, completing a remarkable eight-year tenure in which he helped pull the U.S. economy out of the worst financial crisis and recession since the 1930s.

Under Bernanke’s leadership, the Fed created extraordinary programs that are credited with helping save the U.S. banking system after the financial crisis erupted in 2008. The Fed lent money to banks after credit markets froze, cut its key short-term interest rate to near zero and bought trillions in bonds to lower long-term borrowing rates.

Yellen, 67, emerged as the top candidate after Lawrence Summers, a former Treasury secretary and White House favorite for the job, withdrew from consideration last month in the face of rising opposition.

A close ally of the chairman, Yellen has been a key architect of the Fed’s efforts under Bernanke to keep interest rates near record lows to support the economy, and she likely would continue steering Fed policy in the same direction as Bernanke.

Her nomination could face resistance from congressional critics who argue that the Fed’s low-rate policies have raised the risk of high inflation and might be breeding dangerous bubbles in assets like stocks or real estate.

Sen. Tim Johnson, D-S.D., who heads the Senate Banking Committee, which must approve Yellen’s nomination, said he would work with the panel’s members to advance her confirmation quickly.

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

The White House announcement comes in the midst of a confrontation between Obama and congressional Republicans, particularly those in the House, over the partial government shutdown and the looming decision on increasing the nation’s $16.7 trillion borrowing limit. Obama has been harshly critical of Republicans for demanding either changes in health care or spending policies in exchange for paying for government operations and raising the debt ceiling.

Mark Zandi, chief economist at Moody’s Analytics, said the administration probably decided to go ahead with the announcement to send a signal of policy stability to financial markets, where investors are growing increasingly nervous over the shutdown and the possibility of default.

“Markets are very unsettled and they are likely to become even more unsettled in coming days,” Zandi said. “Providing some clarity around who will be the next Fed chairman should help at least at the margin.”

The search for a successor to Bernanke grew unusually public when Summers and Yellen emerged as the top two contenders. Through August and into September, Yellen and Summers themselves kept a low profile but their warring camps waged a fight that stirred up Congress, spawned opinion columns and letters from Congress, and triggered commentary from notables both inside and outside the economics profession.

Yellen drew outspoken support from Senate Democrats, a third of whom signed a letter this summer urging Obama to choose her. This month, more than 350 economists signed a letter to Obama urging him to nominate Yellen.

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