A new Federal Reserve boss © spirit of america/Shutterstock.com
A new Federal Reserve boss

Janet Yellen has taken her oath of office, becoming the 15th person and the first woman to chair the Federal Reserve in its 100-year history.

The Fed boss holds one of the most powerful jobs in the world. Most pronouncements by the central bank reflect the chairman’s wishes, even though decisions about monetary policy are made by committee.

The Fed controls the supply of money, sets targets for short-term interest rates and regulates private banks. Its mandate is to keep unemployment low, prices stable and the economy growing.

President Barack Obama faced a huge decision when it was time to replace Ben Bernanke after his eight-year tenure as chairman. The president chose to promote Yellen, who was the Fed’s vice chair.

“The Federal Reserve is incredibly relevant to everyone’s day-to-day life,” says Greg McBride, CFA, chief financial analyst at Bankrate.com. “A new Federal Reserve chairman is more significant to Americans, in terms of their pocketbooks, than the changing of the president.”

The Fed’s work affects your job stability, the performance of your 401(k) and how much you spend at the grocery store, McBride says.

Who has led the Fed? Here are profiles of Yellen, Bernanke and his predecessor, Alan Greenspan.

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Janet Yellen

Janet Yellen © Photo by International Monetary Fund

Current position:

  • Fed chair since February 2014.
  • Fed board member through 2024.

Education:

  • B.A. in economics, Brown University.
  • Ph.D. in economics, Yale University.

Professional background:

  • Fed vice chair from October 2010 until she assumed the chairmanship.
  • Previously served as president and CEO of the Federal Reserve Bank in San Francisco and as a Fed economist.
  • Professor emeritus of business administration at the University of California, Berkeley.

What kind of chairwoman will she be? “Yellen taking over is like sliding the co-pilot to the pilot’s chair,” says McBride, noting that she has been an advocate for the current course of monetary policy.

Lawrence Yun, chief economist for the National Association of Realtors, adds that Yellen “leans a little bit on the side of being more tolerant of inflation in order to bring down unemployment.”

As Fed vice chair, Yellen supported the positions of then-Chairman Ben Bernanke, and people assume she’ll continue the Fed’s easy-money policies and focus on job growth, says Edmund Moy, chief strategist for Morgan Gold in Seattle and a former director of the U.S. Mint.

“She’s not known to follow any particular economic philosophy, so there’s some risk there, since no one really knows what she might do,” Moy says.

Yellen is the world’s first woman to lead a major central bank.

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Ben Bernanke

Ben Bernanke © Photo by Talk Radio News Service

Current position:

  • Distinguished Fellow in Residence at The Brookings Institution, Washington, D.C., think tank.

Education:

  • B.A. in economics from Harvard University.
  • Ph.D. in economics from the Massachusetts Institute of Technology.

Professional background:

  • Federal Reserve chairman from February 2006 through January 2014.
  • Chairman of the President’s Council of Economic Advisers under President George W. Bush.
  • Professor of economics at Princeton University, 1985-2002.
  • Professor of economics at Stanford University, 1979-1985.

His legacy: Bernanke should rightfully be remembered for saving the U.S. economy from an outright depression in 2008, says McBride.

“He deserves credit for having a steady hand, because things could have been so much worse,” says McBride. “But ultimately his legacy will depend on whether the stimulus can be removed without causing significant disruption to the economy or inflation. The book won’t be closed on Bernanke for years.”

Yun agrees that Bernanke’s actions meant that the country had a Great Recession instead of a second Great Depression.

“Even though the recovery is sluggish, it’s moving in the right direction,” he says.

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Alan Greenspan

Alan Greenspan © Photo by The Aspen Institute

Current position:

  • President of consulting firm Greenspan Associates.

Education:

  • B.S., M.A. and Ph.D. in economics from New York University.

Professional background:

  • Federal Reserve chairman, 1987-2006.
  • Headed National Commission on Social Security Reform, 1981-1983.
  • Chairman of the President’s Council of Economic Advisers under President Gerald Ford.

His legacy: After holding the chairmanship for five four-year terms, Greenspan is viewed as the quintessential Federal Reserve chairman, Moy says.

“He communicated well so as not to rock the markets unless he meant to,” says Moy. “But now that more research has been done, some people think that maybe his easy-money policies contributed to the (2008) financial crisis.”

During his tenure, Greenspan is credited with using monetary policy to keep inflation low and with steering the economy through multiple global economic crises and the 2000 dot-com bubble. He also led efforts to encourage lending after the 2001 terrorist attacks.

But while Greenspan’s terms as Fed chairman laid the foundation for tremendous economic growth in the 1980s and 1990s, Yun says he neglected to pay enough attention to the dangers of rapid appreciation in the housing market.

McBride agrees. “Alan Greenspan was looked at as a deity when he was Fed chair,” he says, “but his reputation took a hit when he left because his policies helped fuel the housing boom and bust.”

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