Senate Confirms Yellen — Now the Hard Part Begins

Economist Janet Yellen smiles as US President Barack Obama announces her nomination for as Federal Reserve chairman at the White House in Washington, DC, on October 9, 2013. Yellen, 67, will be the first woman ever to lead the Fed, and is widely expected to sustain Bernanke's focus on supporting the US economy until joblessness can be brought down.  
National Journal
Catherine Hollander
See more stories about...
Catherine Hollander
Jan. 6, 2014, 1:06 p.m.

The Sen­ate voted 56-26 on Monday to con­firm Janet Yel­len as the next chair of the Fed­er­al Re­serve, el­ev­at­ing her to ar­gu­ably the most power­ful wo­man in Wash­ing­ton. It won’t be an easy job.

In ad­di­tion to over­see­ing the un­wind­ing of the cent­ral bank’s bond-buy­ing pro­gram and likely its first in­terest-rate hike since Decem­ber 2008, Yel­len will in­her­it the Fed chair­man’s twice-yearly grilling by mem­bers of Con­gress. The Fed chief is re­quired by law to provide semi­an­nu­al up­dates on mon­et­ary policy to the Sen­ate Bank­ing and House Fin­an­cial Ser­vices com­mit­tees.

It won’t al­ways be pleas­ant, but Yel­len’s job might be slightly easi­er than that of her pre­de­cessor, Ben Bernanke. Not only is the eco­nomy slowly im­prov­ing but the Fed is also eas­ing off a bond-buy­ing pro­gram known as “quant­it­at­ive eas­ing” that has drawn cri­ti­cism from a num­ber of con­gres­sion­al Re­pub­lic­ans, who say it could have un­in­ten­ded neg­at­ive con­sequences for the eco­nomy.

“There’s al­ways a ten­sion between the Fed and the Con­gress, which is sort of a right­ful ten­sion, but I don’t think it’s go­ing to be as in­tense,” said Stu­art Hoff­man, chief eco­nom­ist at the PNC Fin­an­cial Ser­vices Group.

From Con­gress’s per­spect­ive, the Fed is trudging to­ward more nor­mal policies, which should please the vo­cal crit­ics on the right, even as it may draw fresh cri­ti­cism from Demo­crats who think the cent­ral bank is back­ing off its sup­port for the fledgling re­cov­ery too soon. From the Fed’s point of view, Con­gress just de­livered more fisc­al cer­tainty — something Bernanke of­ten urged it to do — with the pas­sage of a mod­est two-year budget agree­ment last month.

But even though the Fed an­nounced it would cut the total num­ber of monthly as­set pur­chases by $10 bil­lion to $75 bil­lion in Decem­ber, the cent­ral bank will still be grow­ing its bal­ance sheet, which crit­ics say could cause fin­an­cial in­stabil­ity, through the bond-buy­ing pro­gram in 2014. “I don’t think the pres­sure lessens up. I just think it changes a little bit the nature of the Re­pub­lic­an cri­ti­cism,” said Sarah Bind­er, a Con­gress ex­pert at the Brook­ings In­sti­tu­tion.

Some of the more polit­ic­ally con­ten­tious as­pects of the Fed are, in ad­di­tion to quant­it­at­ive eas­ing, its work as a fin­an­cial reg­u­lat­or and its trans­par­ency. A bill that would open up the cent­ral bank’s mon­et­ary-policy de­cisions to con­gres­sion­al scru­tiny has been the most prom­in­ent ef­fort in re­cent years to change the Fed; it passed the House in 2012 but has so far failed to ad­vance in the Sen­ate.

“I would be very con­cerned about le­gis­la­tion that would sub­ject the Fed­er­al Re­serve to short-term polit­ic­al pres­sures that could in­ter­fere with [its] in­de­pend­ence,” Yel­len said at her con­firm­a­tion hear­ing, echo­ing con­cerns that Bernanke raised dur­ing his ten­ure.

She may be forced, like Bernanke, to de­fend her po­s­i­tion again.

The House Fin­an­cial Ser­vices Com­mit­tee an­nounced last month that it would spend 2014 ex­amin­ing the Fed’s mis­sion through a series of hear­ings and is pre­pared to mark up le­gis­la­tion to re­form the Fed later next year. The first of 2014, sched­uled for Thursday, will fo­cus on the in­ter­na­tion­al im­pacts of the Fed’s bond-buy­ing pro­gram.

What We're Following See More »
ECONOMY STABILIZING
Fed Leaves Rates Alone, but Signals Hikes to Come
38 minutes ago
THE DETAILS

The Federal Open Market Committee today voted to leave interest rates alone, but "upgraded its assessment of the economy’s recent performance and said near-term risks to the outlook have diminished, effectively leaving the door open to raise rates later this year, possibly as early as September."

Source:
CHARM OFFENSIVE
Pence Is Trump’s Man on Capitol Hill
2 hours ago
THE LATEST

"Spurred by VP pick Mike Pence, a former congressman with close ties to many lawmakers, the Trump campaign in recent weeks has stepped up its courtship of wary Capitol Hill Republicans. And the efforts appear to be bearing fruit." Central to the charm offensive: invitations to more than a dozen "Senate and House members into his family’s private box for some power-schmoozing with him and his kids" during the Republican National Convention.

Source:
PAUL RYAN: STOP IT
Trump Encourages More Spying by Russia
2 hours ago
THE LATEST

Donald Trump essentially encouraged more Russian espionage against Democrats in a press conference this morning. "Russia, if you’re listening, I hope you’re able to find the 30,000 emails that are missing,” he said. “I think you will probably be rewarded mightily by our press.” That prompted Brendan Buck, spokesman for House Speaker Paul Ryan to say: “Russia is a global menace led by a devious thug. Putin should stay out of this election.”

Source:
ONE MORE INVESTIGATION
IRS Investigating Clinton Foundation
4 hours ago
WHY WE CARE

Investigations are never far from the Clintons, and here's another: At the behest of "dozens" of Republican lawmakers, the IRS is opening a fraud investigation into the Clinton Foundation."The move signals a shift from the IRS's announcement last year that it would not look into allegations of financial irregularities at the well-connected charity."

Source:
INFIGHTING AMONG COMMISSIONERS TO BLAME
Report Details Terrible Morale at FEC
4 hours ago
THE DETAILS

"Bickering commissioners, ineffective managers and lousy internal communication rank among the top reasons why the Federal Election Commission" has some of the worst morale in the federal government. That's the conclusion of an inspector general's report, which put "the most blame on the FEC’s six commissioners: three Democratic appointees and three Republican appointees who have regularly criticized one another and frequently (but not exclusively) deadlocked on high-profile political issues before them."

Source:
×