Janet Yellen has a dovish approach that may help her to be appointed as the Federal Reserve’s new chairman, succeeding the current head Ben Bernanke whose term is set to expire this January. The soft spoken and thorough Fed vice-chair recently appeared before the Senate Banking Committee while answering questions from lawmakers about the state of the economy and what steps are necessary to keep things afloat and in perspective.
During the hearing, Yellen made clear her intention of retaining the monetary spigots very open and reducing unemployment as a base platform of managing the economic affairs of the country. She likewise rejected the idea that asset bubbles are a consequence of quantitative easing.
Yellen, 67, also admitted in not so succinct manner that the Fed lost handle of the market in last summer’s apparent tapering where interest rates surged pushing the mortgage points by as much as 100 making the financial market tight.
President Barack Obama nominated Yellen to the bank’s top post in October. Bernanke’s second four-year term as chairman of the bank will end by January 31. And if ever her appointment will be approved by the Senate she will become the first woman to lead the Fed and the first Democrat to become Fed chairman since Paul Volcker retired in 1987.
Both Yellen and Bernanke are considered “doves” because they champion the idea to minimize unemployment especially during weak economic activity. On the other hand, “hawks” are generally less concerned with economic growth as much as they are concerned in making interest rates high to keep inflation in control as a matter of fiscal policy. With her dovish approach, the Fed when Yellen is already in charge will still maintain low interest rates for quite some time.
As a former president of the San Francisco Federal Reserve Bank and a top economic adviser of former President Bill Clinton, Yellen is poised to become the most powerful woman in finance.
On a 14-8 vote, Yellen’s nomination progressed easily in the Senate Banking Committee. Right now, her nomination will be voted upon by the whole Senate sometime next month. What will be going in favor of Yellen is the recent result of a rule change with regard to processing presidential nominees in the Senate. Previously, a nominee needs 60 votes to successfully pass the senate but with the lobby and voting of the Democrats it was lowered down to 51. Currently, out of the 100 chamber seats, 55 of them are occupied by the Democrats.
Five Republicans already support her nomination: Bob Corker of Tennessee, Mark Kirk of Illinois, Tom Coburn of Oklahoma, Susan Collins of Maine and Lindsey Graham of South Carolina. However, one Democrat who voted against her in the committee level was Joe Manchin of West Virginia citing reason that Yellen has no intention to limit the Fed’s bond-buying activities.
Several Republican lawmakers also expressed apprehension over the possibility of inflation and asset bubbles to occur. They said that the central bank has allowed the huge spending of the Obama administration which leveraged on the new Treasury debt issuances.
Whether these varying viewpoints may affect the chances of her making the cut, Janet Yellen’s dovish approach may still be her ace up her sleeves as she is soon poised to become Bernanke’s successor.
By Roberto I. Belda