Janet Yellen, the woman nominated to succeed Ben Bernanke as chair of the Federal Reserve, faces questions Thursday from members of the Senate Banking Committee about how she plans to run the nation's central bank. So far, there has been no serious indication that her Senate confirmation is in danger.
In written testimony released late Wednesday ahead of her appearance, Yellen said the job market and economy are "performing far short of their potential." The relative brevity of the written remarks released, at just over 900 words, foreshadows what is likely to be far more important at the hearing: That is the way she responds to questions from senators from both parties.
Sen. Bob Corker, R-Tenn., has said he wants to know more about the Fed's plans to exit from current monetary policy, which is a combination of record-low interest rates and $85 billion in monthly asset purchases.
Anticipating questions about that exit, Yellen's written testimony included a defense of current policy. "A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy," she said.
As for possible bottlenecks, Sen. Rand Paul, R-Ky., could try to hold it up so that his Fed audit measure can be considered. Similarly, Sen. Lindsey Graham, R-S.C., has threatened to gum up the works, demanding more information from the administration about the 2012 Benghazi, Libya, attack. Not related? Neither are Obamacare and the debt ceiling, which some in Congress tried to link before the shutdown. But that's the politically charged environment in Washington these days.
Yellen's appearance before the Democratic-controlled panel provides supporters and critics an opportunity to publicly display their positions on the appointment. The committee is comprised of 12 Democrats and 10 Republicans. So far, no Republican member of the panel has stated flat-out that he would vote against Yellen, although several have raised questions about today's Fed policy with Yellen as current vice chair.
Behind the scenes, Yellen's nomination has been carefully managed by the Fed and White House with the goal of winning sufficient support in the Senate. She has met privately with senators to lobby for their votes. The private process also gives her the opportunity to try to defuse criticism and to address concerns.
Her selection by President Barack Obama has been widely praised.
In remarks prepared for delivery at the hearing, panel chairman Tim Johnson, D-S.D., said Yellen "has a strong track record in evaluating trends in the economy; her economic analysis has been spot-on."
At the same time, critics who aren't happy with the multi-trillion-dollar expansion of the Fed's balance sheet under Bernanke see Yellen's management of monetary policy as more of the same.
Lynn Reaser, chief economist with Point Loma Nazarene University, says, "She has deep knowledge of the workings of the economy and also has the insights to foresee turning points in the economy that are critical to the Fed's forecasting role."
Her supporters rallied earlier this year when it appeared that former Treasury Secretary Larry Summers would be President Obama's pick for the job. Summers eventually withdrew his name from consideration amid the uproar.
Appearing recently at the National Press Club, former Chairman Alan Greenspan said he learned from Yellen. He described her as "an extraordinarily good economist." Greenspan called her helpful "because she was a professor and academic who had very significant insights into where various new theories were coming up and the like in academia."
A former chief economist for the Federal Reserve Bank of Dallas, Michael Cox says he believes Yellen's confirmation "is virtually a sure thing." While he calls her "very bright," Cox says, "She's more of a dove than Bernanke." Cox, director of the O'Neil Center for Global Markets and Freedom at Southern Methodist University, accuses the Fed of using "methamphetamine monetary policy, running the economy on the drug of low interest rates."
The Fed's next meeting is scheduled for mid-December, with a chairman's news conference to follow. Bernanke is expected to preside at his final meeting in January 2014, when only a written statement is released.
What do you think of Yellen's nomination and the upcoming Senate Committee hearing?
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