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 »
"American spies collected information last summer revealing that senior Russian intelligence and political officials were discussing how to exert influence over Donald J. Trump through his advisers." The conversations centered around Paul Manafort, who was campaign chairman at the time, and Michael Flynn, former national security adviser and then a close campaign surrogate. Both men have been tied heavily with Russia and Flynn is currently at the center of the FBI investigation into possible collusion between the Trump campaign and Russia.
"Former FBI Director Robert Mueller has been cleared by U.S. Department of Justice ethics experts to oversee an investigation into possible collusion between then-candidate Donald Trump's 2016 election campaign and Russia." Some had speculated that the White House would use "an ethics rule limiting government attorneys from investigating people their former law firm represented" to trip up Mueller's appointment. Jared Kushner is a client of Mueller's firm, WilmerHale. "Although Mueller has now been cleared by the Justice Department, the White House may still use his former law firm's connection to Manafort and Kushner to undermine the findings of his investigation, according to two sources close to the White House."
Senate Intelligence Committee chairman Richard Burr (R-NC) and ranking member Mark Warner (D-VA) will subpoena two businesses owned by former National Security Advisor Michael Flynn. Burr said, "We would like to hear from General Flynn. We'd like to see his documents. We'd like him to tell his story because he publicly said he had a story to tell."