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(NECN: Peter Howe, Boston) - After bipartisan trans-ideological opposition erupted to former Harvard University president and treasury secretary Larry Summers, President Obama Wednesday named Federal Reserve vice chair Janet Yellen to succeed Ben S. Bernanke as the nation’s top central banker.
Vowing to "promote maximum employment, stable prices, and a strong and stable financial system," Yellen, if confirmed by the Senate, would be taking over the chairmanship as newly released minutes from its September meetings show the Fed’s policymakers are deeply divided over if, when, and how much to cut back – or "taper," as Wall Street says – the Fed’s extraordinary fiscal stimulus. The Fed’s been buying $85 billion worth of bonds a month, effectively printing dollars to do so, to keep interest rates low and stocks high in an effort to make American businesses more willing to invest and American homeowners and stockholders feel richer and more willing to spend.
Eric Stein, a top portfolio manager with Eaton Vance Management, which runs funds with more than $260 billion in assets, said he expects in Yellen something between a continuation of the Bernanke status quo and an even more activist, stimulus-dishing Fed.
"She’s been really right there with Bernanke throughout the whole crisis," Stein said. "She supports all the policies of the Fed. If anything, she'd actually be more aggressive on the monetary-easing front." Stein also expects Yellen to be status-quo-plus when it comes to efforts Bernanke has made to communicate more often and more transparently with the public about what the Fed’s collectively thinking about how well the economy is recovering and what it plans to do around setting interest rates.
"She's someone who chairs the subcommittee at the Fed on Fed communications, so she's really been at the forefront of trying to have the Fed more open from a communications perspective," Stein said.
Yellen, 67, was born in Brooklyn and got a college degree in economics at Brown University and a PhD from Yale, and before serving as vice chair of the Fed headed the San Francisco Fed. She’d be the first woman ever to head the Fed in its 100-year history.
For decades, the Fed’s been charged by Congress with pursuing what’s known as "the dual mandate" – policies to promote maximum employment and subdued inflation. But in practice, the inflation side of that mandate has tended to get more focus. Yellen, who would be the first Democrat named to lead the Fed since Paul Volcker in 1979, is expected to be much more aggressively focused on the employment side of things.
"She's probably more focused on unemployment than any member of the Federal Open Market Committee," Stern said.
Indeed, in her remarks after being introduced by Obama, Yellen said: "The mandate of the Federal Reserve is to serve all the American people, and too many Americans still can’t find a job and worry how they'll pay their bills and provide for their families. The Federal Reserve can help if it does its job effectively."
President Obama said from personal conversations with Yellen, he’s seen that "she understands the human costs when Americans can't find a job. She's said before, 'These are not just statistics to me. The toll is simply terrible on the mental and physical health of workers, on their marriages their children,'" Obama said, predicting Yellen "will be a champion" for unemployed Americans.
Politically, after a rare convergence of Senate liberals like Massachusetts’ Elizabeth Warren and GOP conservatives chased off Summers, a former top economic adviser to Obama who was seen as the president’s clear first choice for the Fed job, Stern predicted the Senate will approve her.
"She may have her critics," Stern said, "but I think at the end of the day, she'll certainly be confirmed."
With videographer Dan Smith