Senate confirms Janet Yellen as Fed chair
The Senate, by a 56-26 margin, confirmed Janet Yellen as the next chairman of the Federal Reserve.
Yellen's vote came amid an ongoing feud between the parties over the confirmation process, driving up animus toward nominees as well.
She takes the job weeks after Republicans on the House Financial Services Committee embarked on a year-long dissection of the institution with an eye toward reform legislation. And cries of "audit the Fed" have grown from fringe voices to a healthy bipartisan contingent that approved such a House bill in the last Congress.
Yellen has received ample praise and little criticism for her robust academic work and extensive experience at the Fed, where she has held multiple positions over several decades between stints of academic work.
The job of the leader of the Fed has become increasingly public as well, between feisty congressional hearings and once-unthinkable press conferences. Yellen's ability to effectively communicate publicly is less established.
"This is probably the biggest unknown with Yellen," said Mark Calabria with the Cato Institute, which has been critical of Fed policies. "We don't really have a lot of data points in terms of her public communication."
Yellen could face hot criticism from conservative Republicans -- particularly in the House -- who have been highly critical of the Fed's policy of stimulating the economy, which Yellen has staunchly backed.
Still, she cruised through her November confirmation hearing, suggesting her dealings with Congress need not be treacherous.
"She'll handle that well," said Rivlin. "She's a sensible and judicious person. She's very good in testimony."
Yellen's big task will be to unwind the trillions of dollars of stimulus the Fed has pumped into the economy. As the recession took its toll, the Fed exhausted its traditional toolbox and began turning to novel approaches in an effort to prop up the economy. But with the recovery taking hold, Bernanke used his last chance to adjust Fed policy to begin winding down the third and presumably final round of "quantitative easing."
The new chairwoman's job will be to complete that task, while making sure the Fed pullback does not trip up the ongoing recovery. Critics of the policy, in which the Fed has purchased trillions in bonds, have argued the central bank is exposing the U.S. to damaging inflation. Others argue unwinding the policy could wreak havoc on markets.
It's Yellen's job to make sure that doesn't happen.
The fact is, no one knows what's going to happen when the Fed stops buying $80 billion in bonds a month. And those trillions of dollars the Fed pumped into the economy have to find a way out or inflation is going to soar.
The High Priests of monetary policy at the Fed seem fairly sanguine about the prospects for continued low inflation. From what I've read in opposition, I certainly hope they're right. The consequences of them miscalculating could be catastrophic in the short run.
Efforts to make the Fed more transparent and thus, more accountable may find an ally in Yellen who seems willing to pull the curtain back, at least slightly, to give us a peek at what's going on. But now that she's ensconced as chairman, I wonder if that attitude will change?