US Senate confirms Janet Yellen as next chair of the Federal Reserve, as first woman to head US central bank
The US Senate on Monday confirmed Janet Yellen as the next chair of the Federal Reserve, making her the first woman to head the US central bank. The Democrat-controlled Senate passed Yellen’s nomination on Monday evening by a vote of 56 to 26. Six Republican senators voted for Yellen, and inclement weather prevented some senators from reaching the Capitol to vote.
Yellen, currently vice-chair, will take over after the incumbent, Ben Bernanke, steps down at the end of January. She will become the first Democrat to run the Fed since Jimmy Carter appointed Paul Volcker in 1979.
Yellen has been one of Bernanke’s staunchest allies on the Fed board and has signaled that she intends to follow her predecessor’s policy of economic stimulus and low interest rates as the US economy continues to recover. Last November, Yellen was approved by 14 votes to eight by the Senate banking panel, on which Democrats occupy 12 of the 22 seats. As the Senate is controlled by Democrats, her appointment on Monday afternoon was extremely unlikely to fail, in particular because new rules mean it requires only a simple majority.
A number of Republican senators voted against Yellen, including Chuck Grassley of Iowa and Rand Paul of Kentucky. Paul pushed unsuccessfully for Yellen’s confirmation to be delayed while he called for an audit of the Fed. Yellen, 67, was the top candidate in a Reuters poll of economists in the summer but appears to have been President Barack Obama’s second choice for the job. Former Treasury secretary Larry Summers was widely seen as the president’s favourite but he withdrew after it became clear many Democrats would not support his nomination.
Obama nominated Yellen in October, calling her “one of the nation’s foremost economists and policymakers”. He said he was “absolutely confident that she will be an exceptional chair of the Federal Reserve”. Yellen, a widely respected academic and expert in the labour markets, has worked for the Fed in various capacities for more than two decades. At her confirmation hearing last November, she pledged to continue the Fed’s $85bn-a-month quantitative easing (QE) stimulus programme, arguing the recovery was still too weak for the Fed to cut support.
“The ripple effects go through the economy and bring benefits to, I would say, all Americans,” she told a Senate hearing.
Since that hearing the US job market has made some clearer signs of a stronger recovery; in December Bernanke trimmed QE to $75bn a month and signalled an unwinding of his signature economic policy.
Despite widespread support among economists and in Washington, Yellen remains a divisive figure for some. The Democratic senator Elizabeth Warren has been critical of the Fed’s, and Yellen’s, regulatory role in the lead-up to the financial crisis. And in the business community there are some who fear her support of Bernanke’s easy money policies will have negative long-term consequences.
Sean Fieler, president of Equinox Partners hedge fund and chairman of Washington-based policy group American Principles Project, said the Fed’s policies had widened the gap between rich and poor. He said rising income inequality was ultimately bad for the US economy. “The very affluent asset holders have benefited while the less well off have been squeezed,” he said. “The Fed’s policy has been a redistribution of wealth to the government and the wealthy from savers and debtors.”