Janet Yellen to be Next Fed Chair

Yesterday, President Obama nominated Janet Yellen to be the next chair of the Federal Reserve. She has been the deputy there for a couple of years, and she is a well-trained and highly respected economist. She will make history by being the first woman to lead the Fed, but her policies are likely to be indistinguishable from those of outgoing Chairman Ben Bernanke. She’s a dove on interest rates, being more concerned about high unemployment in the current environment than the possibility of inflation ticking up in years to come.

That attitude, of course, means she will be in for a rough ride from the economic illiterates in the Senate who will be voting on her confirmation. “Ms Yellen subscribes to the liberal school of thought that the best way to handle our nation’s fiscal challenges is to throw more money at them,” John Cornyn of Texas, the party’s whip in the Senate, said in a statement. “This stimulus obsession is the reason the nation finds itself in the fiscal calamity it does today, and the last thing we need is a leader at the helm of the Federal Reserve who is intent on more quantitative easing that harms our economy.”

Another idiot who is driving the American middle class into the ground with his folly is Senator Bob Corker, a leading Republican on the banking committee, who said in a statement, “I voted against Vice-Chairman Yellen’s original nomination to the Fed in 2010 because of her dovish views on monetary policy. We will closely examine her record since that time, but I am not aware of anything that demonstrates her views have changed.”

Well, they should not have changed because she has been right all along. Unless there are jobs, there is not hope of economic recovery, and without economic recovery, the Federal deficit will not go away. The truth is that boom times with high employment are the key to eliminating the deficit, not tax reductions or spending cuts. However, there are too many lawyers in Congress and not enough people who understand the social sciences (or any other kind of science for that matter).

Nevertheless, Dr. Yellen will likely win confirmation from the Senate. The Democrats have 55 seats, so unless the Republicans decide to filibuster the nomination and force a cloture vote requiring 60 votes, she will win the day. And given all of the current nonsense going on with the government shutdown and the looming debt ceiling problems, it is doubtful the GOP will have the stomach for a fight over the Fed chair.

There is, however, one thing about her appointment that should make the populists happy. She is not now nor has she even been a denizen of Wall Street. She is an Ivy Leaguer, and she taught at the London School of Economics as well as Harvard and Berkeley. But she has never cashed a bonus check from an investment bank. That alone makes her a welcome choice. Maybe, just maybe, the Fed will look after the entire economy now rather than focusing on the financial sector, important though it is.

This journal expects her nomination to win the approval of about 70 senators.