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Obama Names Yellen for Fed, Just as Fiscal Battle Heats Up Announcing Fed Nomination, Obama Praises Yellen
(about 4 hours later)
WASHINGTON — President Obama on Wednesday announced one of his most important economic decisions, nominating Janet L. Yellen to lead the Federal Reserve system and be his independent co-steward of the American economy. He called her “one of the nation’s foremost economists and policy makers.” WASHINGTON — President Obama on Wednesday announced what he called perhaps his most important economic decision, nominating Janet L. Yellen to lead the Federal Reserve system and be his independent co-steward of the economy, calling her “one of the nation’s foremost economists and policy makers.”
Ms. Yellen, 67, who would be elevated from her current position as the Fed’s vice chairwoman if the Senate confirms her nomination for a four-year term, would be the first woman to lead the Fed. She joined Mr. Obama before the cameras in the State Dining Room of the White House for the formal announcement. With them was the retiring chairman, Ben S. Bernanke, whom the president hailed for helping to guide the economy through the worst recession and financial crisis since the Depression. Ms. Yellen, 67, would be elevated from the Fed’s vice chairwoman to become the first woman to lead the 100-year-old central bank. The Senate is generally expected to confirm her nomination for the four-year term.
“I could not be more grateful for his extraordinary service,” Mr. Obama said. For the announcement, she joined Mr. Obama in the State Dining Room of the White House, along with the retiring chairman, Ben S. Bernanke, whom the president hailed for helping guide the economy through the worst financial crisis since the Depression.
As for the woman he has chosen to replace Mr. Bernanke, the president said that Ms. Yellen was “renowned for her good judgment,” and that she sounded early alarms about the financial and housing bubbles that caused the economy’s near-collapse in 2008. The president said Ms. Yellen was “renowned for her good judgment,” and he credited her with sounding early alarms about the financial and housing bubbles that caused the economy’s near-collapse in 2008.
“Given the urgent economic challenges facing our nation, I urge the Senate to confirm Janet without delay,” Mr. Obama said. “I’m absolutely confident that she will be an exceptional chair of the Federal Reserve.”“Given the urgent economic challenges facing our nation, I urge the Senate to confirm Janet without delay,” Mr. Obama said. “I’m absolutely confident that she will be an exceptional chair of the Federal Reserve.”
Ms. Yellen, in a brief response, said, “While I think we all agree, Mr. President, that more needs to be done to strengthen the recovery, particularly for those hardest hit by the Great Recession, we have made progress. The economy is stronger and the financial system sounder.” In a brief response, she said: “While I think we all agree, Mr. President, that more needs to be done to strengthen the recovery, particularly for those hardest hit by the Great Recession, we have made progress. The economy is stronger and the financial system sounder.” Her comments are likely to be parsed by lawmakers and markets looking for signs of whether Ms. Yellen will continue the Fed’s stimulative monetary policies.
Ms. Yellen’s nomination comes amid one of the most rancorous and fraught battles in years between the political parties over the course of the economy. The federal government is already in partial shutdown because of an impasse over funding in the fiscal year that began Oct. 1, and the Treasury Department is approaching the debt limit next week, jeopardizing its authority to borrow to pay the nation’s bills and forcing emergency actions that could be financially destabilizing at best and provoke a global crisis at worst. Her nomination comes amid the rancorous partisan battle over the economy. The government has been partly shut down since Oct. 1, and next week the Treasury Department will hit the limit of its authority to borrow to pay the nation’s bills. That is forcing emergency actions and contingency plans that could be financially destabilizing at best and provoke a global crisis at worst.
The nomination adds a wild card to the mix, and the need for Senate hearings, debate and votes adds to Congress’s already complicated mix of year-end business. A few Senate Republicans, like Senator Bob Corker of Tennessee, have spoken out against her as too dovish on monetary policy, but Ms. Yellen is widely expected to be confirmed. Ms. Yellen’s nomination hearings will add another wild card to a complicated mix of year-end legislative business. Mr. Bernanke’s term ends Jan. 31.
Administration officials say the timing of her pick is mostly a coincidence, but it could serve Mr. Obama’s interests in the current budget fight. A few Senate Republicans, like Bob Corker of Tennessee, have spoken out against Ms. Yellen as too dovish on monetary policy; he and others made the same complaints in 2010 when the president named her as vice chairwoman. But no Senate Republicans have signaled any intention to try to block her appointment, said a leadership aide.
Ms. Yellen has nearly unanimous support in the Democratic majority in the Senate, which must confirm her for the job. By contrast, had Mr. Obama nominated Lawrence H. Summers, who was thought to be Mr. Obama’s first choice but was a divisive figure among Democrats, that would have injected a wedge at a time the president needs a united party at his back. Perhaps worse, it would have ensured a Senate confirmation fight when Mr. Obama least needs it and when markets crave greater certainty in the direction of both monetary and fiscal policy. That suggests that Ms. Yellen could be confirmed with a majority vote, not a 60-vote supermajority, in a Senate where Democrats have 52 members and often count on support from the two independent senators. Ms. Yellen has nearly unanimous support among Democratic senators.
Financial markets and businesses have been anxious to know who would take over from Mr. Bernanke when his term ends Jan. 31, and who would wind down the expansionary monetary policy that he engineered to help the recovering economy – particularly given the three-year-old stalemate between the Democratic White House and the Republican-controlled House of Representatives over the more stimulative fiscal policies that Mr. Obama favors. Generally markets see Ms. Yellen as representing welcome continuity after Mr. Bernanke, having been his ally on the major issues. By contrast, had Mr. Obama nominated his first choice for Fed chief, Lawrence H. Summers, his former economic adviser, he would have alienated many Congressional Democrats when he needs a united party as he confronts the Republican-controlled House of Representatives over government financing and the debt ceiling. And it would have assured a confirmation fight when markets crave greater certainty in fiscal policy.
With Congressional Democrats eager for the first Fed chief with a Democratic pedigree, for the first time in a quarter-century – both President Clinton and Mr. Obama previously named Republican appointees Alan Greenspan and Mr. Bernanke, respectively, to second four-year terms – progressive senators and outside groups pressed for Ms. Yellen over Mr. Summers, viewing her fairly or not as more open to regulating big banks and more likely to stress the job-creation aspect of the Fed’s dual mandate to fight unemployment and inflation. Ms. Yellen would be the first Democrat to be Fed chief in a quarter-century — President Bill Clinton and Mr. Obama previously named two Republicans, Alan Greenspan and Mr. Bernanke, to second terms. Progressive senators and outside groups had pressed for Ms. Yellen’s nomination rather than Mr. Summers’s, viewing her as more inclined to regulate big banks and more likely to stress the job-creation aspect of the Fed’s dual mandate to fight unemployment and inflation.
Among Republicans, Senator Michael D. Crapo of Idaho, the senior Republican on the Senate Banking Committee, was noncommittal in a statement on his Web site. Senator Michael D. Crapo of Idaho, the senior Republican on the Senate Banking Committee, which must clear the nomination before it moves to the full Senate, took a neutral tone in a statement reacting to the announcement.
“The next Fed Chair faces a unique set of challenges, including winding down unconventional monetary policy, implementing a long list of unfinished rules under Dodd-Frank without over-regulating the community banking sector, and effectively communicating future policies to the markets and the public,” he said. “I continue to strongly disagree with the Fed’s use of quantitative easing, and am eager to learn Ms. Yellen’s vision for the direction of the Federal Reserve as we go through the nomination process.” “The next Fed chair faces a unique set of challenges,” he said, “including winding down unconventional monetary policy.”
He also said the Fed must carry out a long list of tightened financial regulations without “over-regulating the community banking sector” and effectively communicate policies to the markets and the public.
“I continue to strongly disagree with the Fed’s use of quantitative easing,” Mr. Crapo said, “and am eager to learn Ms. Yellen’s vision for the direction of the Federal Reserve as we go through the nomination process.”
The president’s decision came weeks later than the markets and even some in the administration had hoped, delayed by Democratic infighting.
Financial markets have been anxious over who would take over from Mr. Bernanke and wind down the expansionary monetary policy that he engineered to help the recovering economy. The Bernanke-led Fed has maintained those policies partly to offset the fact that the White House and Congress were providing no fiscal stimulus, and instead have pursued contractionary spending cuts since Republicans took over the House.
Generally, market analysts favored Ms. Yellen’s selection, seeing her as a welcome continuity after Mr. Bernanke, and more likely, perhaps, than Mr. Summers to continue the monetary expansion a bit longer.