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Janet Yellen becomes first woman to chair US Fed

Photo: AFP

The US Senate confirmed Janet Yellen on Monday as the first woman to lead the country's Federal Reserve, elevating an advocate of fighting unemployment and a backer of spurring the economy with low interest rates and massive bond purchases.


Yellen, 67, will take over as chair of the Federal Reserve when Ben Bernanke’s term comes to a close at the end of this month. In doing so, she will take the reins of the world’s largest economy and become the most powerful person in the world of finance. She has been the bank’s No.2 since 2010.

Senators voted to confirm her appointment by 56-26 margin, with numerous absences caused by airline flight delays forced by arctic temperatures around much of the country. All 45 voting Democrats were joined by 11 Republicans in supporting Yellen, while 26 Republicans voted against.

The Federal Reserve, or Fed, sets the nation’s monetary policy – including raising or lowering interest rates – with the goals of maximising employment and stabilising prices. It also supervises and regulates banking institutions.

With the economy rebounding from the recession but only modestly so far, economists expect Yellen to focus on how to nurture growth without risking a spike in inflation.

“The big debate will be when the Fed should tighten and how much, rather than when to step on the gas pedal and how hard,” predicted Bill Cheney, chief economist for John Hancock Financial Services, who envisions a growing economy this year.

Under Bernanke, the Fed has driven short-term interest rates down to near zero and flushed money into the economy with huge bond purchases, which it has just started to ease. Yellen, a strong Bernanke ally, has supported those policies and is expected to follow through with them until concrete signs emerge of sustained improvement of the economy and job market.

‘A fierce champion’

In a written statement, President Barack Obama said Yellen’s approval means “the American people will have a fierce champion” who will protect them.

“I am confident that Janet will stand up for American workers, protect consumers, foster the stability of our financial system and help keep our economy growing for years to come,” Obama said. “She understands the human cost when people can’t find a job.”

Lobbyists for the banking and financial services sectors issued statements pledging to work with Yellen. Both industries have led a fight to water down restrictions imposed by Obama’s 2010 law overhauling how the US financial system is regulated.

A native of Brooklyn, New York, Yellen previously headed the Federal Reserve Bank of San Francisco, chaired President Bill Clinton’s Council of Economic Advisers and has been an economics professor at the University of California at Berkeley.

Yellen, who as an academic has focused on unemployment and its causes, is considered a “dove” who wants the Fed more focused on creating jobs because unemployment is high and inflation is low. “Hawks” on these issues prefer a stronger emphasis on preventing inflation.

‘Easy money’

In brief debate on her nomination, Democratic Senator Sherrod Brown lauded Yellen, who was one of the first to warn in 2007 of a housing bubble that could burst and damage the entire economy.

“She understands how risky financial practices deep inside the largest Wall Street banks can have a terrible and terrifying impact on American families,” Brown said.

But Yellen’s Republican critics denounce her support of what they call the Fed’s “easy money” policies of low interest rates and bond purchases, which they say create investment bubbles that could burst and damage the economy anew.

“No one can deny that the risks are real and could be devastating” if those policies continue for too long, Republican Senator Charles Grassley said.

President Barack Obama nominated Yellen in October after considering selecting Lawrence Summers, a former Treasury secretary who had been a close Obama adviser early in his presidency. Summers withdrew after opponents complained about his temperament and past support for bank deregulation.

The US economy has grown only very modestly since the recession officially ended in June 2009, though it has shown encouraging signs in recent months.

Unemployment fell to seven percent last month, down from a peak of 10 percent in October 2009. The economy grew at an annual rate of 4.1 percent from July to September and has added an average 200,000 jobs monthly since August.

(FRANCE 24 with AP and REUTERS)

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