January 6, 2014—In a historic vote, Janet Yellen ’67 won Senate
approval today to become the new head of the Federal Reserve. Yellen,
who was nominated by the first African-American U.S. president, becomes
the first woman to lead the national bank. Twelve Republicans joined
Democrats for the 56 to 26 vote. (Severe weather kept many senators
away and unable to vote.) Yellen is also the first Democratic nominee
to lead the Fed since 1979, and joins World Bank president Jim Yong
Kim ’82 as Brown alums leading two of the world’s most powerful
financial
institutions.
Courtesy AP
Yellen with President Obama.
Yellen, who will become chairwoman when she succeeds Ben Bernanke
on February 1, has long been a familiar face in economic policy
circles. During the
1990s, she took a leave from her faculty job at UC Berkeley to join the
Fed as a member of the board of governors before moving on in 1997 to
head the Council of Economic Advisers, where she regularly briefed
President Bill Clinton. Before rejoining the Fed as vice chair in 2010,
she served as president and CEO of the Federal Reserve Bank of San
Francisco.
Yellen's nomination had broad support from Wall Street, monetary policy
experts, and despite early grumbling, members of Congress. She is
widely admired for her analytical
rigor and is a specialist in the causes, mechanisms, and implications
of
unemployment. Although she is expected to broadly continue Bernanke's
approach, Yellen will likely put more emphasis on
countering joblessness than on pounding away at inflation, the Fed’s
traditional priority. In December she voted to begin easing the Fed's
extraordinary efforts to revive the U.S. economy, an approach that has
kept interest rates close to zero. As the economy recovers, Yellen's
first task will be to oversee that easing.
Unlike many of her peers, Yellen is credited with having observed
some of the earliest signs of the 2008 financial meltdown, the credit
crunch, and the slow recovery; once the crisis became reality,
she pushed the Fed to make lowering unemployment a higher priority. In
a February 2013 speech, Yellen described the “devastating” effect of
long-term unemployment on individuals, and also argued that the
phenomenon has “the potential to itself become a headwind restraining
the economy.”
Yellen, a native of Brooklyn, graduated summa cum laude from Brown
with a degree in economics, and earned a PhD at Yale in 1971. She was
awarded the Wilbur Cross Medal from Yale in 1997 and an honorary doctor
of laws degree from Brown in 1998.
A professor emerita at Berkeley, where she has been a faculty member
since 1980, she’d earlier taught at Harvard and the London School of
Economics. Her initial focus at Brown wasn’t economics, but philosophy.
In a prophetic 1997 BAM interview, Yellen said she switched after
taking economics courses and learning about, among other things, how
the Fed’s actions impact the overall economy.
Professors George Borts and Herschel Grossman “taught me that
economics was a subject where a systematic way of thinking about the
world translated into policy prescriptions with real social impact,”
Yellen recalled. “I remember sitting in Herschel Grossman’s class and
thinking, ‘Gee, I didn’t realize how much influence the Federal Reserve
has on the health of the economy. If I ever have a chance at public
service, [a Fed post] would be a worthwhile thing to do.’”