Yellen Confirmation Vote Possible Tonight

The New YorkrnTimes is reporting that, weather permitting, the Senate may vote Mondayrnnight on the nomination of Janet L. Yellen to lead the Federal Reserve.  The confirmation of Yellen, currently the Fed’srnvice-chairwomen would be historic as she would become the first woman to headrnthe central bank in the U.S. although a number of women have held suchrnpositions in other countries.  She wouldrnalso be the first Democrat Chairman since Paul Volcker was picked by JimmyrnCarter in 1979.</p

If confirmed Yellen will replace Ben Bernanke whornhas served two terms as Fed Chairman after being nominated by George W.rnBush.  Yellen has been a close ally ofrnBernanke and supported his accommodative monetary policies but did join withrnall but one of her colleagues in a December policy vote to begin winding downrnthe Fed’s asset purchase program. </p

A macroeconomist specializing in employment issues, she holds a Ph.D. inrneconomics from Yale granted in 1971. She graduated summa cum laude from Brown,rnalso in economics, in 1967 and was a member of the faculty at HarvardrnUniversity and is a Professor Emeritus at the University of California atrnBerkeley where she was the Eugene E. and Catherine M. Trefethen Professor ofrnBusiness and Professor of Economics.  Shernbecame Fed Vice-Chair in 2010.</p

As MND reported at the time of her nomination by President Obama in October,rnYellen was among the first to warn of the dangers of a housing bubble, doing sornwhile President of the Federal Reserve Bank of San Francisco in 2005.  </p

(Read More: Yellen Brings Impeccable Foresight and Soothing Continuity as Fed)</p

At that time she said there were severalrnreasons why monetary policy might not be the best tool to deflate that bubble.  “For one thing, no one can predict exactly howrnmuch tightening would be needed, or by exactly how much the bubble should bernreduced. Beyond that, a tighter policy to deflate a housing bubble could imposernsubstantial costs on other sectors of the economy that would lead to equallyrnunwelcome imbalances. Finally, it’s possible that other strategies, such asrntighter supervision or changes in financial regulation, would not only be morerntailored to the problem, but also less costly to the economy.  Her bottom line, she said, was that monetaryrnpolicy should react to rising home prices or prices of any other asset “onlyrninsofar as they affect the central bank’s goal variables-output, employment,rnand inflation” </p

She also warned of a possible credit crunch and ensuing recession when the Boardrnof Governors met to discuss the looming financial crisis in 2008.  The “shadow banking system was freezing up,rnshe said, and the economy was likely to slow significantly.</p

The Times said Yellen needs onlyrnthe votes of a simple majority of senators and no Republican support when thernvote is called.  Several Republicanrnsenators, notably Rand Paul (R, KY) had threatened to put a hold on herrnnomination but that threat has apparently been lifted.

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