quotes

Thursday, April 29, 2010

Janet Yellen Tapped to Lead Trio of Nominees for Fed Board

President Obama acted quickly to nominate a team of three to fill the open seats of the Federal Reserve Board. He saw it as a chance to gather a strong team of experts to revamp the economy using their influence on monetary policy. Each nominee has expertise in specific areas such as the labor market, federal budget, and financial regulation. Being that these are the three current concerns in economic policy, it makes sense to nominate these three experts.

The first to be tapped for Vice Chairman of the Federal Reserve is Janet Yellen. She is the current president of the Federal Reserve Bank of San Francisco, which oversees the economy of the 12th district. Yellen is a voting member of the Federal Open Market Committee (FOMC) and Professor Emeritus at the UC Berkeley Haas School of Business. She is originally from Brooklyn, NY and received her degree in Economics from Brown in 1967, and later graduated from Yale 1971 with her PhD. In July of 2009, Dr. Yellen was a potential successor to Bernanke before he was renominated by President Obama for another term as Fed Chairman. Dr. Yellen also served as the Chairwoman of the White House Council of Economic Advisors for President Clinton from 1997 to 1999. This vast experience makes her well respected within the Federal Reserve system and academia.

As expressed in the Fed Board's latest statement, the economy is slowly coming back with better housing numbers and consumer spending, however unemployment and lower income levels remain troubling. Therefore, Dr. Yellen, an expert in macro and labor economics, will be a great addition to the Board. She voiced concerns about how downward prices may lead to deflation and further increase unemployment and decrease incomes as businesses struggle to spur demand. She admits this is unlikely as the Fed and policymakers work hard to stimulate a recovery. Dr. Yellen also understands that the Fed is an independent body, and in her speeches, she keeps the focus of discussion on monetary policy. However, if there are issues that deserve attention such as employment, she is not hesitant to voice concern and pressure DC politicians to act in accordance with the Fed.

President Obama also nominated Peter Diamond to fill an open Board seat. Diamond is a professor of Economics at MIT and has written about the federal budget deficit. He co authored a book with Peter Orzag, Chairman of the Congressional Budget Office (CBO). Diamond understands that Social Security and Pensions are unsustainable, and if they are not reformed, the budget deficit will deepen. But are these problems for the Fed to address? This is the responsibility of the CBO, and it seems that Diamond's expertise lies beyond the Fed's core duties.

Sarah Bloom Rasken was also tapped to join the Federal Reserve Board. She is currently a lawyer and consumer advocate. She is a strong fighter for financial reform and regulation. If confirmed, Rasken will be the main liaison between DC and the Fed. She will help determine the Fed's role in further financial reform. I hope that she will help with Bernanke's fight to keep the Fed independent and reserve one of their main roles of preceding over banks through regulation, handling reserves, and ensuring consumer protection. This allows the Fed to be in tune with banking conditions around the country to make major monetary policy at the national level. The board members must be in the know, and Rasken will serve as that connection of information.

Overall, I support Janet Yellen for the Vice Chairman position, however Diamond and Rasken has expertise that mixes too well with DC responsibilities. That mix is not helpful to the Fed's independent approach to policy making, and these two nominations present some concern. The final decision is up to the Senate, and there are no apparent oppositions as of yet.

No comments:

Post a Comment