by. Henry Meier
It is being widely reported today that President Obama will nominate Fed Vice Chairman Janet Yellen to be the first Chairwoman of the Federal Reserve replacing Ben Bernanke, whose term ends on January 31, 2014. Here are some pretty safe assumptions.
First, Yellen’snomination process will be highly politicized. With the everpresentthreat of a filibuster of the nomination and the relatively moderateRepublican members of the Senate Banking Committee looking to burnish their conservative bona fides either during or in the aftermath of thegovernment shut down debate, look for Yellento be caricaturedasa Trotskyite in disguiseby Conservatives who is anxious to maximize employment without regardto inflationand the Joan of Arc of financial reform by liberals on theoppositeend of the divideanxious to suggest that any criticism of her is reflective ofnothing more than the latent misogyny of the old boys network. In truth, of course,Janet Yellen is no radical. However, there have been certain themes that she has consistently championed thatprovide clues as to how theChairmanshipmay affect credit unions in themonths and years to come.
Most importantly, she isthe foremost advocateother than the Chairman himself of the Fed’s bond buyingprogram.For instance, in aFebruary 11,2013 speech, she bluntlyresponded to criticswho suggested that the Fed’s bond-buying programs do too little tofoster economic growth to justify their continuationstating”I believe the Federal Reserve asset purchases andother unconventional policy actions have helped, and arecontinuing to help, fill the gap and shore up aggregate demand.”
Secondly, one of the themes of the Bernanke Chairmanship has been a move toward greater transparency in the hopes of getting markets to respond more uniformly to theFed’s policy directions. Although the downside of this policy was on full display recently as mortgage rates skyrocketed in response to a belief that the Fed would soon be reducing its bond buying purchases only to have the Board unexpectedlystay the course, don’t expect a Chairman Yellen to back away from this ship called transparency. In fact, it is fair to say that she was not simply an advocate of this policy, but one of its architects.
