WASHINGTON — Janet Yellen, nominated Wednesday to lead the Federal Reserve system, said “we have made progress” in difficult economic times while acknowledging that more challenges await.
President Barack Obama nominated Yellen, calling her “one of the nation’s foremost economists and policymakers.”
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 Obama before the cameras in the State Dining Room of the White House for the formal announcement. With them was the retiring chairman, Ben Bernanke, whom the president hailed for helping to guide the economy through the worst recession and financial crisis since the Depression.
“I could not be more grateful for his extraordinary service,” Obama said.
As for the woman he has chosen to replace Bernanke, the president said that 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.
“Given the urgent economic challenges facing our nation, I urge the Senate to confirm Janet without delay,” Obama said. “I’m absolutely confident that she will be an exceptional chair of the Federal Reserve.”
Yellen 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.”
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.
The nomination adds a wild card to the mix, and the need for Senate hearings, debate and votes adds to Congress’ already complicated mix of year-end business. A few Senate Republicans, like Sen. Bob Corker of Tennessee, have spoken out against her as too dovish on monetary policy, but Yellen is widely expected to be confirmed.
“Republicans may vote against Yellen, but given that she is not a highly polarizing figure and is not seen as a partisan, not to mention the gender politics of her being the first woman nominated to lead the Fed, we doubt she will be blocked by Republicans,” Brian Gardner, senior vice president for Washington research at Keefe, Bruyette & Woods Inc., said in a note to clients.
Administration officials say the timing of her pick is mostly a coincidence, but it could serve Obama’s interests in the current budget fight.
Yellen has nearly unanimous support in the Democratic majority in the Senate, which must confirm her for the job. By contrast, had Obama nominated Lawrence Summers, who was thought to be 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 Obama least needs it and when markets crave greater certainty in the direction of both monetary and fiscal policy.
Financial markets and businesses have been anxious to know who would take over from 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 3-year-old stalemate between the Democratic White House and the Republican-controlled House over the more stimulative fiscal policies that Obama favors. Generally, markets see Yellen as representing welcome continuity after Bernanke, having been his ally on the major issues.
Yellen’s appointment “does add certainty, in the absence of certainty, for stocks,” said Jim Russell, a regional investment director at U.S. Bank. “It perhaps keeps a little bit of a safety net under equities for the near, or intermittent, term.”
Some viewed Yellen, fairly or not, as more open than Summers to regulating big banks and more likely to stress the job-creation aspect of the Fed’s dual mandate to fight unemployment and inflation.
Sen. Michael Crapo of Idaho, the senior Republican on the Senate Banking Committee, was noncommittal about Yellen.
“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 Yellen’s vision for the direction of the Federal Reserve.”
This report includes material from the Associated Press and Bloomberg News.