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.