Yellen Cruises Toward Confirmation at Drama-Free Fed Hearing

WASHINGTON, DC - NOVEMBER 14: Nominee for the Federal Reserve Board Chairman Janet Yellen leaves after her confirmation hearing November 14, 2013 on Capitol Hill in Washington, DC. Yellen will be the first woman to head the Federal Reserve if confirmed by the Senate and will succeed Ben Bernanke.
National Journal
Catherine Hollander
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Catherine Hollander
Nov. 14, 2013, 11:45 a.m.

Sen­ate hear­ings aren’t al­ways so drama-free, par­tic­u­larly when it comes to head­line-mak­ing, polit­ic­ally charged in­sti­tu­tions like the Fed­er­al Re­serve.

But Thursday’s nom­in­a­tion hear­ing for Janet Yel­len to suc­ceed Ben Bernanke at the helm of the cent­ral bank was smooth sail­ing. Yel­len made no ob­vi­ous verbal fumbles when she ap­peared be­fore the Sen­ate Bank­ing Com­mit­tee and provided her op­pon­ents no fresh fod­der, af­firm­ing her com­mit­ment to the Fed’s cur­rent policy course. Law­makers for their part wer­en’t es­pe­cially ag­gress­ive in their lines of ques­tion­ing.

“I think it went very much ac­cord­ing to ex­pec­ted script,” said Bri­an Gard­ner, seni­or vice pres­id­ent of Wash­ing­ton re­search at in­vest­ment firm Keefe Bruy­ette & Woods.

Sev­er­al sen­at­ors fo­cused on in­come in­equal­ity and how the Fed’s policies are help­ing Main Street.

“In many ways, easy money is an elit­ist policy. It’s the ul­ti­mate trickle-down,” Sen. Bob Cork­er, R-Tenn., said. “Would you agree that while it has been an at­tempt to stim­u­late the eco­nomy, the more well-off have be­nefited much bet­ter than those at the lower end of the spec­trum?”

Yel­len replied that while the Fed’s policies do be­ne­fit stocks, they also help the hous­ing sec­tor.

She ac­know­ledged, when asked, that the Fed’s low-in­terest-rate policies don’t be­ne­fit savers, but she urged law­makers to take a broad­er view.

“Savers wear a lot of dif­fer­ent hats,” she said. For ex­ample, a saver might also want a part-time job or have grand­chil­dren gradu­at­ing from col­lege who want to enter a strong job mar­ket, she said.

Demo­crat­ic Sens. Chuck Schu­mer of New York and Heidi Heitkamp of North Dakota each ques­tioned Yel­len about the coun­try’s rising in­come in­equal­ity and middle-class struggles. Yel­len poin­ted out that these trends go back dec­ades, and that their cause is still be­ing de­bated.

“Many of the un­der­ly­ing factors are things that are out­side the Fed­er­al Re­serve’s abil­ity to ad­dress,” she said.

Law­makers di­vided the rest of their ques­tions between the cent­ral bank’s role as a fin­an­cial reg­u­lat­ory agency as well as the mon­et­ary-policy path it’s on. Yel­len in­dic­ated that she would sup­port the Fed’s cur­rent pro­gram — reg­u­lar as­set pur­chases in­ten­ded to bring down long-term in­terest rates and boost growth — for the time be­ing.

“I con­sider it im­per­at­ive that we do what we can to pro­mote a very strong re­cov­ery. We’re do­ing that by con­tinu­ing our as­set pur­chase pro­gram,” Yel­len said. She ac­know­ledged the risks in end­ing the pro­gram too soon — or too late — and prom­ised a “data de­pend­ent” ap­proach to mak­ing that de­cision.

“Over­all, her ap­pear­ance seemed judged to re­as­sure mar­kets and Re­pub­lic­ans on the com­mit­tee that she would con­tin­ue with the cur­rent Chair Bernanke’s ap­proach and wouldn’t pur­sue a more ag­gress­ive policy in or­der to re­duce the un­em­ploy­ment rate more quickly,” Paul Ash­worth, chief U.S. eco­nom­ist at mac­roe­co­nom­ic re­search firm Cap­it­al Eco­nom­ics, wrote in a note fol­low­ing the hear­ing.

On fin­an­cial reg­u­la­tion, Yel­len steered clear of of­fer­ing spe­cif­ic prom­ises for what would be done and when. Sen. Eliza­beth War­ren, D-Mass., asked the vice chair­wo­man wheth­er she would con­sider con­ven­ing reg­u­lar meet­ings of the cent­ral bank to dis­cuss su­per­vis­ory and reg­u­lat­ory is­sues the way it does mon­et­ary policy. Yel­len poin­ted to some leg­al re­stric­tions on dis­cuss­ing reg­u­la­tion in pub­lic, but said she would con­sider the ad­di­tion of a su­per­vis­ory meet­ing.

Sens. Dav­id Vit­ter, R-La., and Sher­rod Brown, D-Ohio, asked about the per­sist­ence of “too big to fail,” the idea that banks re­ceive an im­pli­cit sub­sidy in the form of lower bor­row­ing rates be­cause they’re thought to be so im­port­ant to the func­tion­ing of the fin­an­cial sys­tem that the gov­ern­ment would bail them out if they ever got in trouble. “We are mak­ing pro­gress,” Yel­len said of the is­sue.

Vit­ter later said he planned to vote against her con­firm­a­tion.

“She made it crys­tal clear today that she would con­tin­ue the Fed’s cur­rent policies of con­tinu­ing ‘Too Big To Fail’ and free money, quant­it­at­ive eas­ing, with no wind down in sight,” he said in a re­lease is­sued by his of­fice. Yel­len is still ex­pec­ted to clear any pro­ced­ur­al hurdles that might come her way, as well as re­ceive the 51 Sen­ate votes ne­ces­sary for con­firm­a­tion.

The Sen­ate Bank­ing Com­mit­tee plans to vote on her nom­in­a­tion “as soon as pos­sible,” ac­cord­ing to a com­mit­tee aide. That could mean as early as next week.

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