President Obama will nominate Janet L. Yellen as chairwoman of the Federal Reserve on Wednesday, White House officials said Tuesday night, ending an unusually prolonged and public search to fill one of the most important economic policy-making jobs in the world.
Ms. Yellen, 67, has been the Fed’s vice chairwoman since 2010, when Mr. Obama nominated her to the post and she was easily confirmed on a voice vote by the Senate. She would be the first woman to run the central bank.
She is also expected to win bipartisan support for her new role in the Democratic-controlled Senate, said Senator Charles E. Schumer of New York. But some Republicans could throw up hurdles. Senator Bob Corker of Tennessee voted against her appointment as vice chairman because of what he called “her dovish views on monetary policy,” and he was already expressing reservations on Tuesday night about her nomination for the top job.
“We will closely examine her record since that time,” said Mr. Corker, who sits on the Banking Committee, which must clear her nomination before it moves to the full Senate. “But I am not aware of anything that demonstrates her views have changed.”
Ms. Yellen’s nomination was widely expected, but she was not thought to be Mr. Obama’s first choice for the job. For months, the speculation was that the president would nominate Lawrence H. Summers, a former adviser of Mr. Obama’s. But Mr. Summers dropped out of the running on Sept. 15 in the face of opposition from Democratic senators. Some in the administration blamed Yellen advocates for churning up the opposition to Mr. Summers.
A native of Brooklyn, she was previously president of the Federal Reserve Bank of San Francisco, a White House adviser, a Fed governor during the Clinton administration and a longtime professor at the University of California, Berkeley.
The most important decisions awaiting Ms. Yellen involve how quickly to wind down the expansionary monetary policy engineered by the current chairman, Ben S. Bernanke. Ms. Yellen worked closely with Mr. Bernanke, whose term ends on Jan. 31, in shaping and building support for that approach in an effort to stimulate the economy and bring down unemployment.
If anything, Ms. Yellen has wanted the Fed to take even more aggressive measures to lift growth, believing the risks of inflation are modest. But her views and Mr. Bernanke’s appear close enough that markets have considered her potential ascension a sign of continuity at the Fed.
Both Ms. Yellen and Mr. Bernanke will join the president at 3 p.m. Wednesday in the East Room of the White House for a formal announcement. Since 2009, Mr. Obama had anticipated that he might eventually nominate Mr. Summers, who for the first two years of his presidency was chief White House economic adviser as director of the National Economic Council. Mr. Obama came to admire Mr. Summers, a former Treasury secretary in the Clinton administration, for the advice he provided at the depths of the recession and financial crisis. In contrast, he does not know Ms. Yellen well.
Mr. Obama’s loyalty to Mr. Summers pitted him this summer against many progressives in his party’s base, as well as liberal Democratic senators, who wanted him to make history by nominating Ms. Yellen.
Senator Sherrod Brown of Ohio, whose letter endorsing Ms. Yellen and signed by a third of Democratic senators helped turn the tide against Mr. Summers, said in a statement late Tuesday, “Today is a historic moment for the Federal Reserve, for women everywhere and for all of us who care about job creation.”
Administration officials and allies said the timing of the Yellen announcement had nothing to do with the fiscal impasse between the White House and the Republican-controlled House. Instead, they said, it was a coincidence caused by Mr. Obama’s delay in deciding finally on Ms. Yellen, and getting her vetted, after Mr. Summers withdrew from contention.
Mr. Bernanke, the Fed’s leader since 2006, announced last month that the central bank would postpone any retreat from its stimulus campaign for at least another month and possibly until next year, because of concerns about the economy. The move surprised economists and investors on Wall Street.
Mr. Bernanke — who has underestimated the economy’s weakness at several junctures during the last few years — said that although conditions were improving, the Fed still feared a turn for the worse. He has expressed concern that Congress is damaging the economy through budget brinkmanship and could cause more damage in the weeks to come. Since then, several Fed officials have publicly questioned his decision in September, highlighting a growing divide over the course of policy that would number among Ms. Yellen’s immediate challenges.
Ms. Yellen, described by one former colleague as “a small lady with a large I.Q.,” forged an academic career at Berkeley as a member of the economics counterculture that attacked the dogma of efficient markets. She has long argued that markets benefit from regulation to prevent abuses and limit disruptions of economic growth.
The Fed’s two main tasks are helping to regulate the financial system and altering interest rates in response to economic growth and inflation. Regulating the financial system has become a much more important part of the Fed’s responsibilities in the wake of the financial crisis.
Many Democrats believe Ms. Yellen is likely to view Wall Street more skeptically than Mr. Summers, even though her views are closer to the centrist stance of the administration than to the positions of liberal Democrats on several regulatory issues. She is not, for example, a supporter of the push to break up large banks.
In the Senate, Republicans have frequently expressed concern that the Fed’s policies may destabilize financial markets and eventually accelerate inflation.Republican senators have typically threatened to filibuster major bills and nominations in recent years, suggesting Ms. Yellen may need 60 votes — including a handful of Republican votes — to be confirmed. A decade ago, Ms. Yellen was one of the first public officials to describe rising housing prices as a bubble that might pop, with damaging consequences for the broader economy. Still, as president of the San Francisco Fed, she did not translate her concerns into actions that might have prevented some of the worst effects of the bubble.
But in the aftermath of the resulting recession, she accurately predicted that the recovery would be painfully slow and that there was little reason to worry about inflation, a view that led her to press for the Fed to expand its efforts to revive the economy. No Federal Reserve chairman has been as deeply steeped in both the theory and practice of central banking as she is.
Mr. Bernanke also brought a distinguished academic history of having studied the Fed, but he spent only a few years as a Fed governor before becoming chairman. Ms. Yellen has spent more than half of the last 20 years as a top Fed official.
Until recently, she was telling friends that she did not expect to be nominated because Mr. Obama had made it clear that he wanted Mr. Summers for the Fed job. But when Mr. Summers withdrew his name on Sept. 15, Ms. Yellen became the front-runner by elimination.
As speculation swirled about the appointment, much of the debate revolved not around economic policy but gender. Mr. Summers, while he was president of Harvard, once wondered aloud whether inherent differences between men and women helped explain a lack of female science professors, causing some women’s groups to oppose his selection to lead the Fed. But within the White House, women were among his biggest supporters.
Some Democrats also argued that Mr. Obama should not pass up the chance to break a glass ceiling, given Ms. Yellen’s qualifications and her position as the Fed’s second-ranking official. No woman has held one of the very top jobs in economic policy-making — Fed leader or Treasury secretary — nor has a woman led any other major central bank in the world.
Mr. Summers’s supporters, including many of the president’s closest advisers, had raised some concerns about Ms. Yellen in recent months. Perhaps most potently, they said that institutions benefited from fresh leadership and argued that Ms. Yellen’s central role in creating the Fed’s current policies could inhibit her ability to make necessary changes.
Her supporters have praised her as self-effacing and keenly intelligent. “She makes an argument on the merits and she sticks with it,” said Alan S. Blinder, an economics professor at Princeton and former Fed vice chairman, who argued for her nomination. “And she’s good at articulating an argument in a way that doesn’t leave people on the other side hopping mad at her.”
President Bill Clinton nominated her to a seat on the Fed’s board of governors in 1994 and then named her head of his Council of Economic Advisers in late 1996. She later returned to Berkeley, and in 2004 became president of the San Francisco Fed, where she remained during the worst of the financial crisis before returning to the Fed as vice chairman in 2010.
Ms. Yellen, slight and white-haired, has a personal style that more closely resembles Mr. Bernanke’s soft-spoken manner than that of some previous Fed chairmen, like Paul Volcker. The force of her arguments can catch people by surprise.
She attended Fort Hamilton High School in Bay Ridge, Brooklyn, and Brown University, and has said that she became interested in economics as a way of thinking logically about how to help people. As a graduate student at Yale, she studied under the Nobel laureate James Tobin, a leading proponent of the view that governments could mitigate recessions.
She built an academic career at Berkeley together with her husband, the economist George A. Akerlof, whom she met in a Fed cafeteria in the late 1970s when they were staff economists. Much of their work together highlighted flaws in the economic theory that markets operate efficiently, a theory that basically treats government policy as inherently costly. Ms. Yellen would be the first Democrat to run the Fed in almost 30 years. With Ms. Yellen’s nomination, Mr. Obama will need to find a new vice chair for the seven-member board of governors. He also may need to fill three of the other seats. Elizabeth Duke resigned from the board in August; Sarah Bloom Raskin has been nominated to serve as deputy Treasury secretary; and Jerome Powell’s term ends in January, although he can continue to serve in the absence of a replacement.
NY Times
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