Who Is Janet Yellen, and What Will She Be Like as the Next Fed Chair?

By Diane Alter, Contributing Writer, Money Morning • October 9, 2013

U.S. President Barack Obama officially nominated Janet Yellen as the next Federal Reserve Chairman today (Wednesday).

Dow and S&P 500 futures immediately jumped late Tuesday on news the nomination was coming. A vote for Yellen suggests continuity, not change.

As Chief Investment Strategist Keith Fitz-Gerald has said, "Yellen has never met a printing press she didn't like."

Markets ended slightly higher Wednesday, with the Dow closing up 26.45 points, or 0.2%, and the S&P 500 up nearly 1 point, or almost 0.1%.

"The markets are finding consolation in Yellen's expected nomination because that at least puts monetary policy on a more certain, or at least, a more familiar path," Anastasia Amoroso, Global Market Strategist at J.P. Morgan Funds in New York, told Reuters. "It does remove another hurdle, another piece of the puzzle, another piece of uncertainty that the market likes to see resolved."

Fed Vice-Chairman since 2010, when President Obama nominated her to the post, 67-year-old Yellen will be the first woman in the central bank's storied history to hold the No. 1 job.

Yellen is expected to win bipartisan support for her new position in the Democratic-controlled Senate (54-46) and secure the 60 votes needed.

However, a handful of Republicans could object.

U.S. Sen. Bob Corker, R-TN, who voted against her appointment as vice-chairman because of "her dovish views on monetary policy," expressed concerns Tuesday night about her nomination for the job.

"We will closely examine her record since that time," said Corker, a member of the Banking Committee, which must clear Yellen's nomination before it goes before the full Senate. "But I am not aware of anything that demonstrates her views have changed."

Here's more on who Janet Yellen is and what she would bring to the job.

Who Is Janet Yellen?

First, some history on Janet Yellen...

A native of Brooklyn, Yellen graduated summa cum laude from Brown University with a degree in economics in 1967. She received her Ph.D. in economics from Yale University in 1971.

Yellen was president of the Federal Reserve Bank of San Francisco from 2004 to 2010. She also had stints as a White House adviser, a Fed governor during the Clinton administration, and she spent a good part of her career as a professor at the University of California, Berkley.

Married to George Akerlof, whom she met in 1977 when both were economists at the Fed board and married in June 1978, Yellen has co-authored a number of papers with her Noble Prize- winning economist husband.

She is also one of the Fed's wealthiest members, according to annual financial disclosures, released by the Fed in April. Yellen had investments worth some $4.8 million in 2012.

Now here are four things that answer who Janet Yellen will be as the next Fed chief:

• Yellen is actually more dovish than Ben Bernanke. As the No. 2 Fed official, Yellen has been a strong proponent of accommodative monetary policies. In 2012 speeches, Yellen explained why interest rates could remain near zero into late 2015. In a 2011 speech, she defended the Fed's launch of and second round of quantitative easing. "She's even more of a dove than Bernanke is, but there's nobody who can say she's not credentialed because of the range of experience she's got," J. Alfred Broaddus, a former president of the Federal Reserve Bank of Richmond, told Bloomberg. "She has experience that almost nobody else can bring to the table at this point."

• However, Yellen has also expressed concern over not letting inflation rise above the Fed's 2% target. In the mid-1990s, when she served on the Fed Board of Governors, she made it known she thought unemployment was dangerously low - so low that employers have to hike wages, which in turn leads to higher prices. "We have an economy operating at a level where we need to be nervous about rising inflation," she said at one meeting. "We can't dismiss the possibility that compensation growth will drift upward, raising core inflation and in turn inflationary expectations. This is a major risk. Obviously, we need to be vigilant in scrutinizing the data for signs of rising wages and salaries."

• Her record on Fed forecasts has been right on target. A Wall Street Journal analysis found that Yellen has produced the most accurate forecasts of all the current Fed officials from 2009-2013.

• She backs tough financial regulations. The 2008 financial crisis turned Yellen into a staunch supporter of stringent oversight for the investment community. "The experience," she told the congressionally created Financial Crisis Inquiry Commission in 2010, "has strongly inclined me toward tougher standard and built-in rules that will kick into effect automatically when things like this happen that make tightening up a less discretionary matter."

Now for what Yellen's appointment means for Wall Street, Washington, and us, read more here...

Related Articles:

• The Wall Street Journal:
  Yellen Is Obama's Choice as Fed Chief
• Bloomberg:
  Yellen to Be Named Fed Chairman, First Female Chief
• Reuters:
  Wall Street Flat as Stalemate Offsets Yellen Optimism