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Thursday, November 14, 2013

Yellen Will Walk ‘A Tight Rope’ At Fed, Says Former Colleague

Janet Yellen, vice chairwoman of the Federal Reserve Bank, is pictured in April 2011. (Mark Lennihan/AP)

Janet Yellen, vice chairwoman of the Federal Reserve Bank, is pictured in April 2011. (Mark Lennihan/AP)

Janet Yellen, President Obama’s nominee to succeed Ben Bernanke as Chair of the Federal Reserve Bank faces a confirmation hearing today in the Senate.

She is expected to be confirmed, though a Washington, D.C.-based conservative group, American Principles in Action, has started a campaign against her nomination, saying the policies she’s advocating will cause inflation.

Here & Now’s Meghna Chakrabarti gets the latest from NPR’s Jim Zarroli, and speaks with Cathy Minehan, a former colleague and friend of Yellen’s.

Minehan tells Here & Now that she’s not yet worried about inflation, but she is worried about the the tight rope Yellen will face: The still slow recovery needs the help of the Fed’s stimulus programs, but continuing those programs for too long could lead to inflation.

To hear the interview with NPR’s Jim Zarroli, click the audio at the top of the page.

Interview Highlights: Cathy Minehan

On not being too worried yet about inflation

“The fact is we need the underlying pace of growth in the economy to kick in, in a very stable way to start creating the demand that is an important part of the inflation equation — before you start getting worried about inflation. And the high wire act is to really figure out when the time is right. I don’t think that there is a greater chance of Janet Yellen being an inflationary chairman than there is Janet Yellen taking away things a little bit early. It’s a high wire act. There are risks on both sides.”

On what Yellen’s mark would be in terms of style and how she presents the Fed

“You know, I wouldn’t have picked Ben Bernanke to go on ’60 Minutes.’ I think Janet’s going to shape a style that may be something that people — knowing her — haven’t really anticipated, because she’ll see there’s a need for the country — as I think was behind Bernanke’s appearing on ’60 Minutes.’ Will she be perfect at it from the beginning? No. Ben wasn’t either. Communication is very hard. I think it’s something that brings with it a level of difficulty that not a lot of people are trained for.”

On what it means to her that Yellen would be the first woman to lead the Fed

“What matters to me is the next chair of the Fed knows his or her economics inside out, upside down, knows how it hits people on the street; is committed and has the brains and the stomach to stand up to criticism — committed to the goals of the Federal Reserve — to low inflation, to financial stability and to supporting growth. And it matters to me that the next chairman of the Fed communicates well, the balance of the things the Fed has to deal with. I think Janet can do all that. I’m thrilled that it’s a woman, but I’m more thrilled that she’s each of those three things.”


  • Cathy Minehan, dean of the School of Management at Simmons College and former president of the Federal Reserve Bank of Boston.
  • Jim Zarroli, NPR business reporter.



Well, before President Obama's surprise announcement today, the big news in Washington was supposed to be Janet Yellen. This morning the president's nominee to head the Federal Reserve began confirmation hearings before the Senate Banking Committee.

JANET YELLEN: It's been a privilege for me to serve the Federal Reserve over the past 36 years and an honor to be nominated by the president to lead the Fed as chair of the Board of Governors.

CHAKRABARTI: If confirmed, Yellen would be the first female chair in Fed history, but she faced tough questions from the senators today. Democrats want monetary policies that encourage job creation, while Republicans are concerned that those same policies could raise inflation. NPR's Jim Zarroli followed the hearing and joins us now from New York. Hi there, Jim.


CHAKRABARTI: So first of all, let us know what were some of the highlights and main questions that came up from the senators today.

ZARROLI: Well, I think the questions, there were two basic questions that she was asked. One had to do with quantitative easing, which is this $85-billion-a-month bond-buying program that the Fed is in as a way of keeping interest rates low and stimulating the economy. A lot of Republicans wanted to know, you know, how long is it - will it last. Are there risks in letting it go on too long?

And she sort of said, you know, it's played a big difference in mitigating the financial crisis, and it's still needed now, but yes, you're right, it can't go on forever. The other area she was asked about a lot was bank regulation, you know, is the Fed doing enough to rein in big banks. Is it supervising the banks as it should? Do they still represent a threat?

And she said, you know, this is an important responsibility. We're doing a lot to regulate the banks, a lot more than we were before the crisis, and that's made a big difference.

CHAKRABARTI: OK, so let's talk a little bit more about the first half of what you're saying, the Fed's massive bond-buying program and how it's propping up the economy because that was the source of a couple of interesting exchanges today. For example, Janet Yellen - we have a little bit tape here - of her responding to some questions about this from Republican Senator Michael Crapo of Idaho.

YELLEN: The Congress has entrusted the Federal Reserve with great responsibilities. Its decisions affect the well-being of every American and the strength and prosperity of our nation, promoting conditions that foster maximum employment, low and stable inflation and a safe and sound financial system.

CHAKRABARTI: So Jim, is there anything that we heard in there that gives us an indication about what Yellen's thoughts are on how long all that quantitative easing is going to go on?

ZARROLI: Yeah, I mean, she - I don't think she really - she didn't give us much in that area. I mean, I think a lot of people, especially in the markets, want to know how long is this going to go on. And I think she said, you know, the same thing that Ben Bernanke, the current Fed chair, has said over and over again, which is it's too soon to stop this now, we still need it, but we're monitoring it very closely.

We're looking at the economy every month, every time we get together. This is what we're thinking about and talking about and, you know, essentially we will let you know, but it's not going to happen anytime soon.

CHAKRABARTI: OK, so what about Republicans' concern about supposedly inflationary policies that the Fed might undertake under Yellen?

ZARROLI: Yeah, she was asked about that. The questioning, I have to say, was fairly civil, fairly polite. You know, there were a lot of questions about inflation. You know, the Fed has these policies to lower rates. Is it inflationary? Is it going to create asset bubbles? Some people think we're already seeing that in the stock market, which has gone up so much. A lot of people worried that we're going to see that in the housing market again.

And she may - she sort of said she didn't think that that's an issue now. It's not a threat. Inflation is still low, you know, it remains low even though a lot of people have been warning for a long time that the Fed's policies would exacerbate inflation. That hasn't happened. And she said that's because demand in the economy is still very weak.

She really, you know, made clear I think that she's going to continue Bernanke's policy. She thinks there's - you know, there's not going to be any regime change, which is one of the reasons why I think the financial markets just didn't have much - they sort of shrugged off her testimony today.

CHAKRABARTI: OK, I was just about to ask you that, any reaction from Wall Street. It sounds like not much.

ZARROLI: There really wasn't very much. I mean, I think people are - have expected that she's - you know, she worked closely with Ben Bernanke. She is known to have supported a lot of the things he did all through the financial crisis. I think people in general think, you know, if anything she might be a bit more dovish about inflation.

But I don't - you know, I think people think she's going to continue what he did. And she didn't say anything to indicate otherwise today. So there really wasn't much of a reaction.


OK, and Jim, as you know, everything's political in Washington, and so I'm wondering how you think these confirmation hearings are going to go. Is it going to end up being a fairly straightforward vote out of the Banking Committee?

ZARROLI: Well yeah, I mean, the Democrats control 12 - I believe 12 of the 22 seats on the Banking Committee. It looks like she's going to get through the committee pretty easily. You know, there doesn't seem to be strong opposition to her. There - and once it goes to the full Senate, there have been some suggestions by some senators like Lindsey Graham that they would place a hold on her, on her nomination.

But I think the Democrats certainly have enough votes to overcome that if they need to.

CHAKRABARTI: That's NPR's business reporter Jim Zarroli on today's hearings with Janet Yellen in front of the Senate Banking Committee, the woman who may be the next chair of the Federal Reserve. Jim, thank you so very much.

ZARROLI: You're welcome.

CHAKRABARTI: This is HERE AND NOW. Transcript provided by NPR, Copyright NPR.

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