Janet Yellen Is About to Be the Most Powerful Woman in the World

Her words will move markets around the globe. Her term will outlast that of the president who nominated her.

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
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Catherine Hollander
Nov. 13, 2013, 5 p.m.

As she steps be­fore the Sen­ate Bank­ing Com­mit­tee on Thursday for her nom­in­a­tion hear­ing to be­come Fed­er­al Re­serve Board chair­wo­man — the cent­ral bank’s first — Janet Yel­len will start a jour­ney that could de­pos­it her in rar­efied ter­rit­ory.

If con­firmed by the Sen­ate as ex­pec­ted, Yel­len would head an agency with broad au­thor­ity to set mon­et­ary policy for the United States and al­most total in­de­pend­ence. Her words will move mar­kets around the globe. Her term will out­last that of the pres­id­ent who nom­in­ated her.

Chart: Dual Challenges for Incoming Fed Chief National Journal

“It’s just so ex­cit­ing to see an­oth­er bar­ri­er come down or an­oth­er glass ceil­ing broken,” said Joyce Jac­ob­sen, an eco­nom­ics pro­fess­or and dean of so­cial sci­ences at Wes­ley­an Uni­versity who helped or­gan­ize a let­ter in sup­port of Yel­len’s can­did­acy this Septem­ber. “This is an­oth­er first, just like when we had the first wo­man on the Su­preme Court.”

Al­though Yel­len has had many chances to make her views on the eco­nomy known — she has giv­en 22 speeches since her ap­point­ment as vice chair­wo­man in 2010 — the grilling that ac­com­pan­ies this type of nom­in­a­tion may be a first. She fielded just 10 ques­tions when she faced the Sen­ate Bank­ing Com­mit­tee for con­sid­er­a­tion as Ben Bernanke’s deputy in Ju­ly of 2010. When Bernanke had his first nom­in­a­tion hear­ing in 2005, he re­ceived roughly 102.

In her open­ing state­ment, Yel­len will pledge to main­tain the Fed­er­al Re­serve’s fo­cus on fin­an­cial sta­bil­ity, ac­cord­ing to pre­pared testi­mony re­leased by the cent­ral bank on Wed­nes­day.

“I am com­mit­ted to us­ing the Fed’s su­per­vis­ory and reg­u­lat­ory role to re­duce the threat of an­oth­er fin­an­cial crisis,” she says, adding that while cap­it­al and li­quid­ity rules and strong su­per­vi­sion may help tackle the “too big to fail” prob­lem, she will try not to over­bur­den com­munity banks and small in­sti­tu­tions in the pro­cess.

Yel­len will also say she plans to con­tin­ue Bernanke’s work to open up the Fed and bet­ter com­mu­nic­ate its de­cisions to the pub­lic. She will cite her work in de­vel­op­ing an ex­pli­cit 2 per­cent in­fla­tion tar­get, which the Fed an­nounced for the first time in 2012.

Of course, law­makers will have ques­tions. They are likely to fo­cus on Yel­len’s as­sess­ment of the eco­nom­ic out­look and what it means for the Fed’s bond-buy­ing pro­gram, which is cur­rently pro­ceed­ing at a pace of $85 bil­lion a month and is in­ten­ded to bring down in­terest rates and spur growth. An­oth­er likely query will fo­cus on the cent­ral bank’s plans to keep its bench­mark in­terest rate near zero — where it has been since Decem­ber 2008 — go­ing for­ward.

Some Re­pub­lic­ans have ex­pressed con­cern that fo­cus­ing too much on bring­ing down the na­tion’s 7.3 per­cent un­em­ploy­ment rate through stim­u­lus meas­ures could set the eco­nomy up for a nasty in­fla­tion spike, al­though eco­nom­ic data have not yet sug­ges­ted this is on the ho­ri­zon. Demo­crats may ask Yel­len why the bank hasn’t been more suc­cess­ful in lower­ing the un­em­ploy­ment rate, which re­mains more than 2 per­cent­age points above its pre­crisis levels.

There are also po­ten­tial ques­tions about oth­er dangers on the ho­ri­zon: as­set bubbles, fin­an­cial shocks, and de­fla­tion. Yel­len will be ex­pec­ted to ar­tic­u­late how the cent­ral bank would handle these and oth­er po­ten­tial chal­lenges. She’s also likely to field ques­tions on fin­an­cial reg­u­la­tion and the Fed’s pro­gress in writ­ing rules un­der the 2010 Dodd-Frank fin­an­cial-re­form law, 60 per­cent of which still need to com­pleted by reg­u­lat­ors, ac­cord­ing to law firm Dav­is Polk & Ward­well.

One par­tic­u­larly con­ten­tious piece, the “Vol­ck­er Rule,” which would ban banks from mak­ing spec­u­lat­ive bets with their own money, is ex­pec­ted to be fi­nal­ized soon and could be a par­tic­u­lar area of fo­cus for law­makers.

If Yel­len is con­firmed, she will be the first fe­male Fed­er­al Re­serve chief, even though the world of cent­ral bank­ing will re­main dom­in­ated by men. The first fe­male gov­ernor to join the cent­ral bank was Nancy Teeters in 1978, and even now only two of the six cur­rent Fed gov­ernors, a count that in­cludes Yel­len, are wo­men.

Yet the idea that she would be the most power­ful wo­man in Wash­ing­ton is hardly an ex­ag­ger­a­tion. Law­makers gave the Fed a dual man­date in 1977 to pre­serve price sta­bil­ity while pur­su­ing max­im­um em­ploy­ment, but it’s up to the cent­ral bank to chart the course to achieve those aims, and it does so with very little in­ter­fer­ence.

The Fed chief has to testi­fy be­fore Con­gress twice a year, but that’s about it. The Fed isn’t sub­ject to the con­gres­sion­al ap­pro­pri­ations pro­cess, nor does the White House com­ment on its policies. It would take le­gis­la­tion — un­likely to pass through this Con­gress — to curb the bank’s in­de­pend­ence.

Yel­len is not ex­pec­ted to have dif­fi­culty be­ing con­firmed on her cre­den­tials. But sev­er­al Re­pub­lic­an law­makers, in­clud­ing Sens. Rand Paul of Ken­tucky, Ted Cruz of Texas, and Lind­sey Gra­ham of South Car­o­lina, have said they will place a hold on her nom­in­a­tion for oth­er reas­ons.

Paul and Cruz want a vote on le­gis­la­tion to audit the Fed­er­al Re­serve, and Gra­ham wants to get an­swers on the 2012 at­tack on the U.S. dip­lo­mat­ic mis­sion in Benghazi. Des­pite these plans, ana­lysts at the Euras­ia Group, a polit­ic­al risk con­sultancy, said last week they didn’t ex­pect Yel­len to have any trouble get­ting the 60 votes needed to over­come these pro­ced­ur­al hurdles or the 51 needed for con­firm­a­tion.

“I think [the hear­ing is] go­ing to be en­ter­tain­ing, but I don’t think there’s go­ing to be any in­dic­a­tion that she’s in any danger,” said Corey Boles, a seni­or ana­lyst at the Euras­ia Group.

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