quinta-feira, 10 de outubro de 2013

Janet Yellen nominated by Obama to be head of US Federal Reserve.Janet Yellen: tough in her views and tough in her independence.

Janet Yellen will be nominated by President Obama to chair the Federal Reserve. Photograph: Robert Galbraith/Reuters

Janet Yellen: tough in her views and tough in her independence
Profile: President Obama's nominee to lead the Federal Reserve has a history of vocal support for her staunch Democratic values

Dominic Rushe and Heidi Moore in New York

Every year, the business magazine Forbes prepares a list of the world’s most powerful women. Next year, most of them will be moving down a place. Jostling Angela Merkel for the top slot will be Janet Yellen, an academic economist and expert on unemployment, Barack Obama’s choice as next chairman of the US Federal Reserve.

Yellen will be the first woman to head America’s central bank in its 100-year history, and her appointment – which has to be ratified by the Senate – comes at a critical time, because the Fed's moves in the coming months and years will reverberate through economies around the world.

Unlike the man described as the rock star of central bankers, Mark Carney of the Bank of England, Yellen is a self-effacing academic who has spent much of her career working behind the scenes at the Fed and teaching students. Her idea of fun is stamp collecting and hosting dinner parties.

“The president could not have found a better qualified candidate for this historic nomination,” said Sheila Bair, former chair of the US bank regulator. “Throughout her career, Janet Yellen has demonstrated a real commitment to public service, and sincere desire for a stable financial system which fulfills the needs of the real economy.”

Yellen’s most crucial dilemma will be to decide when – or how – to turn off the flood of cheap money the Fed has been pouring into the US economy – at a rate of $85bn a month – to kickstart America's recovery.

When Ben Bernanke, the current chairman, even suggested he might be ready to start winding down the programme in May, markets from South America to southern Asia reacted violently.

Yellen has been known as a staunch supporter of Bernanke’s medicine: “The biggest thing it does is represent continuity in terms of the policies that the Fed has had in place for a while,” said Karim Basta, director of economic research and chief investment strategist at the hedge fund III Associates. “She was the architect of those.”

Yellen, is currently Bernanke’s No 2 and spearheaded many of the policies that have characterized Bernanke’s more open approach to communication. She encouraged the Federal Reserve to set specific targets for inflation and unemployment, to hold more press conferences to explain their actions, and publish the forecasts of each voting member of the Federal Reserve’s board of governors.

Analysis by the Wall Street Journal shows that time and again, her forecasts were most accurate of those on the board. Yellen was not, however, Obama’s first choice for the job. She won the nomination only after a long and unusually public battle that pitched her against one of the president’s key advisers, former Treasury secretary Larry Summers.

Summers withdrew from the race as it became clear that he would face serious opposition from Obama’s own party, namely senators worried about the former Clinton adviser’s history of helping deregulate financial markets.

While Summers faced opposition from the left, Yellen, a Democrat, is already facing opposition from rightwing senators concerned by her continuing support of Bernanke’s quantitative easing programme, which they believe undermines the dollar and risks unleashing inflation.

Even within the White House it is unclear how much support Yellen really has. Obama aides appear to have been briefing against her in the run up to the nomination, describing her as methodical, meticulous and somewhat distant. She was not a “team player”, anonymous sources suggested to media outlets.

But if anyone is prepared for a fight, it’s the diminutive Yellen. “Janet is very tough – tough in her views and tough in her independence,” Laura D’Andrea Tyson, a friend and former Clinton administration official told USA Today.

Yellen’s career in economics began at Brown University, in Rhode Island, in 1963, she graduated from there with top honours in 1967. A Fed insider since 1977, when she was an economist with the board of governors, Yellen has consistently shown she is prepared to speak her mind. Compared to her somewhat gnomic boss, she is a model of clarity.

Before the housing crash, when Bernanke was still dismissing signs of a price bubble, and Yellen was San Francisco Fed president, she warned fellow Fed policy makers there was “a 600lb gorilla in the room, and that is the housing sector”. She said the risk of a house prices crash and vast numbers of people losing their homes was causing her “appreciable angst”.

But Yellen has acknowledged that she did little to rein in the 600lb gorilla. The San Francisco Fed oversaw the mortgage lender Countrywide Financial, once the largest sub-prime home loan lender in the US. Yellen admitted to a congressional commission investigating the financial crisis in 2010 that the Fed did not do enough to halt its excesses.

The rulebook written to curb excessive risk-taking by banks were inadequate, she told the congressmen. “You could take this, rip it up, and throw it in the garbage can.”

While she foresaw many of the issues that would trigger the worst recession in living memory, Yellen did not force through tougher regulation.

Much of Yellen’s academic research – often carried out with her husband, fellow Berkeley economics professor George Akerlof, who is a Nobel prize winner – has focused on the costs and causes of unemployment. “These are not just statistics to me. We know that long-term unemployment is devastating to workers and their families,” she said in a speech to a trade union in February.

For Yellen, economics is not a dry subject: it is about real lives, and she believes it is worth risking a little inflation if it results in jobs. She has also analysed single motherhood, denying it is a result of welfare payments and blaming it on a decline in shotgun weddings.

The economics gene has been passed to Yellen and Akerlof’s son. Robert Akerlof teaches economics at Warwick University. He may well have picked up the basics at mealtimes – his mother joked in 1995 that dinner at her house meant “a diet that is richer in discussions of economics and policy issues than many people would find appetising.”

Janet Yellen is to be confirmed as Barack Obama's nominee to chair the US Federal Reserve. Photograph: Eugene Hoshiko/AP

Janet Yellen nominated by Obama to be head of US Federal Reserve
President will nominate Yellen as head of US central bank on Wednesday, ending long debate over successor to Ben Bernanke

Dominic Rushe in New York

The White House is to name Janet Yellen as the first woman to head the US Federal Reserve, arguably the most important job in world finance, the Obama administration has confirmed.

Barack Obama is to make the announcement at 3pm ET on Wednesday, the White House said. Yellen and the current Fed chair, Ben Bernanke, are expected to attend.

The nomination ends a long – and often bitter – public debate about Obama's choice for Fed chairman. Yellen has long been seen as the frontrunner to succeed Bernanke, who is set to step down early next year. But she faced stiff opposition from former Treasury secretary Larry Summers, who had strong support within the administration. If approved by the Senate, Yellen would be the first woman to head the central bank in its 100-year history.

Yellen's appointment comes at a crucial moment for the Fed, which is currently pumping $85bn (£52bn) a month into the US economy through an economic stimulus programme known as quantitative easing. Yellen has been seen as one of Bernanke’s key allies in the stimulus package, which has split the Fed board, as other members have been increasingly concerned about the impact of the massive bond-buying programme.

Yellen’s appointment also comes as Congress argues over raising the US debt ceiling. Bernanke has consistently warned that failure to raise the US borrowing limit would have a severely negative impact on the country’s still-fragile economic recovery.

The 67-year-old economist and Brooklyn native was appointed vice-chair of the Fed in October 2010. Previously she was president and CEO of the Federal Reserve Bank of San Francisco and also served as chair of the Council of Economic Advisors from 1997 to 1999.

An expert on the job markets, Yellen has been a staunch ally of Bernanke as he has tried to use low interest rates and QE to reanimate the US’s still-lackluster job market.

Summers had been seen as the Obama administration’s favoured candidate. But his candidacy ran into opposition from Democrats unhappy with Summers's history as a champion of financial deregulation before the financial crisis, and was forced to withdraw his candidacy for the position.

Senator Tim Johnson, a Democrat who heads the Senate banking committee, which must approve Yellen's nomination, said he would work with the panel's members to advance her confirmation quickly. "She has a depth of experience that is second to none, and I have no doubt she will be an excellent Federal Reserve chairman," Johnson said in a statement.

Senator Chuck Schumer, a Democratic committee member, called her "an excellent choice" and predicted she would be confirmed by a wide margin.

Yellen had long been considered a logical candidate for the chairmanship, in part because of her expertise as an economist, her years as a top bank regulator and her experience in helping manage the Fed's polices. Her understanding of the financial system is widely respected: before the crisis struck, she was among a minority of top economists who had warned correctly that sub-prime mortgages posed a severe threat.

On the Fed, Yellen has built a reputation as a "dove" — someone who is typically more concerned about keeping interest rates low to reduce unemployment than about raising them to avert high inflation. Her nomination could face resistance from congressional critics who argue that the Fed's low-rate policies have raised the risk of high inflation and might be encouraging dangerous bubbles in assets like stocks or real estate.

Republican senator Bob Corker of Tennessee, member of the Senate banking committee, said he voted against her for vice chair in 2010 because of her dovish policies. "I am not aware of anything that demonstrates her views have changed," he said.

Still, Yellen has said that when the economy finally begins growing faster and rates will need to be raised to prevent high inflation, she will move in that direction.

Yellen drew outspoken support from Senate Democrats, a third of whom signed a letter this summer urging Obama to choose her. Last month, more than 350 economists signed a letter to Obama urging him to nominate Yellen.

Charles Geisst, a finance professor at Manhattan College and the author of Wall Street: A History, said Bernanke’s successor would have some tough comparisons to live up to. The current Fed chairman has served since 2006 and was appointed by Obama’s predecessor George W Bush. He has been Fed chairman during some of the most turbulent economic periods in US history. “Bernanke will probably go down in history as the man who saved the world’s financial system,” said Geisst.

The Associated Press contributed to this report

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