New Fed chief will be one of world’s most powerful women
As soon as this week, a quiet economist could become one of the most powerful women in the world.
The U.S. Senate is expected to approve President Barack Obama’s nomination of Janet Yellen to chair the Federal Reserve System, the nation’s central bank. Yellen, who spent decades teaching at the University of California at Berkeley and six years running the Fed’s San Francisco region, would be the first woman in the post – which holds vast sway over the global economy.
“She’s overqualified, which is hard to say for a position like that,” said economist Carl Shapiro, a longtime colleague of Yellen’s at UC Berkeley. Shapiro, like others, praises her knowledge, experience, savvy and temperament.
A UC Berkeley spokeswoman said Yellen, 67, was not granting interviews. As far back as her first term on the banking system’s board of governors, she has kept a low profile.
“Markets hang on one’s every word, sometimes reading too much into what one says,” she told a Fed magazine in 1995.
That spotlight is about to grow more intense.
Yellen grew up in a working-class neighborhood in Brooklyn, N.Y. Her parents – a schoolteacher and a physician – spoke often of their struggles during the Great Depression, which later led to Yellen’s belief that government must sometimes intervene to keep the economy humming.
The Federal Reserve historically does that by raising or lowering short-term interest rates. But with those rates at or near record lows, the Fed in recent years has been buying billions of dollars’ worth of U.S. Treasury securities to drive down long-term rates. The idea is to encourage big businesses to hire by assuring them it will remain inexpensive to borrow money.
Experts agree that one of Yellen’s key tasks will be deciding when and how quickly to taper off the bond buying, which critics say has artificially boosted the financial markets. Though the global credit crash of 2008 is in the rearview mirror, the economy remains fragile.
And that decision could be only the beginning of her impact on monetary policy, since future presidents, if they choose, will be able to extend her four-year term as Fed chair until 2024.
Yellen is married to fellow UC Berkeley professor emeritus George Akerlof, who won the Nobel Prize in economics in 2001. They have a net worth of $4 million to $13 million, according to Yellen’s 2012 financial disclosure filing.
As Fed chairwoman, she would be paid $199,700 a year – the same as a Cabinet secretary.
People who have worked with Yellen, though, note her down-to-earth touch. An expert in fiscal policy and international trade, she has also twice won the top teaching award at Cal’s Haas School of Business.
“In government institutions and in teaching, you need to inspire confidence,” Yellen told the school’s alumni magazine last year. “You have to very clearly explain what you are doing and why.”
Obama’s first choice to succeed Ben Bernanke, who has held the Fed’s top post since 2006, was believed to be former Harvard University president and U.S. Treasury Secretary Lawrence Summers. But some Democrats objected to his closeness to Wall Street – and his outsize personality.
Yellen won’t bring the hubris of a Summers or of burly, cigar-chomping Paul Volcker, who chaired the Fed under Presidents Jimmy Carter and Ronald Reagan.
“At the Federal Reserve, you don’t get far by pounding the table; you get it by pounding the facts,” said Jim Wilcox, another UC Berkeley economics professor who has known Yellen for three decades and also has extensive Washington experience.
Wilcox recalled the “hundreds” of lunches he and Yellen have shared along Telegraph Avenue in Berkeley over the years. “It was often a very lively exchange … probing to see how far I could push an argument, then watching it crash and burn as she shot holes in it.”
He and other friends also call Yellen a gourmet cook, though she’s been known to frequent the Fed’s employee cafeteria in order to “learn what people are thinking about,” as she said in the 1995 interview.
Austan Goolsbee, former chairman of Obama’s Council of Economic Advisers, said Yellen’s personableness and knack for communication are “a perfect fit for what they need at the Fed right now.” He introduced then-candidate Obama to Yellen when she chaired President Bill Clinton’s economic council.
Goolsbee said that despite Washington’s partisan atmosphere, “She’s respected by people of every side.” Indeed, Yellen largely sailed through last month’s confirmation hearing in front of the Senate Banking Committee.
Sen. Dianne Feinstein, D-Calif., told the San Jose Mercury News via email that Yellen “has a strong grasp of economic and monetary policy, shaped by years of study and practical application.”
Feinstein, who has seen the number of women in the Senate swell from four when she was first elected in 1992 to the current 20, added: “I think a woman as head of the Federal Reserve – a talented and extraordinarily qualified woman – is a positive development.”