Yellen’s Path to the Pinnacle
Janet L. Yellen, President Obama’s choice to be chief of the Federal Reserve, has long been an influential voice in economic and monetary affairs. Here are milestones in her career in academia and government.Brooklyn Roots
Janet Louise Yellen is born in Brooklyn. Her father is a family doctor working out of a home office; her mother is a former schoolteacher.
A Young Scholar
She graduates from Fort Hamilton High School and is named "class scholar," though "most likely to succeed" went to someone else. In her senior year, she is admitted to an honors science program at Columbia to study math on Saturday mornings, is one of 29 students awarded a Regents college scholarship, and wins a mayor's citation for scholarship. Her hobbies, she writes in the school newspaper, are "attending off-Broadway theater, eating, riding the 69 St. Ferry, exploring New York City, and reading philosophy so that I can write unpopular essays."A Budding Economist
Ms. Yellen receives a Ph.D. in economics from Yale after earning an undergraduate degree from Brown. At Yale, she studies under the Nobel laureate James Tobin, a leading proponent of the view that governments could mitigate recessions; she later describes him as her intellectual hero.Teaching at Harvard
She spends six years as an assistant professor at Harvard, but fails to secure tenure.
A Partner, in Economics and Life
She goes to work as an economist with the Board of Governors of the Federal Reserve System, where she meets George A. Akerlof, a fellow economist, over lunch. They are married a year later. Much of their work together highlights flaws in the economic theory that markets operate efficiently, a theory that basically treats government policy as inherently costly. Their work showed that government, including central banks, could indeed adopt economic policies that improved people’s lives. (Mr. Akerlof goes on to share the Nobel in economic science in 2001.)
An Academic Home
After teaching at the London School of Economics from 1978 to 1980, she joins the faculty of the Haas School of Business at the University of California, Berkeley. Students recall Ms. Yellen's patience in explaining concepts in the classroom; she writes her lecture notes by hand.
A Place on the Fed Board
In April 1994, Ms. Yellen is nominated to be a member of the Federal Reserve Board of Governors, and is confirmed in August. The nomination, along with that of Alan S. Blinder, reflects the Clinton administration's desire to offset the market-oriented conservatism of the Fed chairman, Alan Greenspan. She is recommended for the post by Laura D'Andrea Tyson, the administration's chief economic adviser and a Berkeley colleague.
Setting an Inflation Target
Ms. Yellen lays the groundwork for the Fed’s commitment to maintain inflation at 2 percent, arguing successfully that seeking to eliminate inflation completely would do more harm than good. Alan S. Blinder, who was vice chairman of the Fed during that time, remembers Ms. Yellen's approach to policy differences as "argumentative, but in a good way."
Ms.
Yellen, then chairwoman of the Council of Economic Advisers, and Robert
Rubin, then Treasury secretary, were on hand as President Clinton
vetoed portions of the federal budget and tax-cut law in August 1997. Ruth Fremson/Associated PressMove to the White House
From her first stint at the Fed, Ms. Yellen moves to the Clinton White House as chairwoman of the Council of Economic Advisers. During her confirmation hearing, she voices support for eliminating the last vestiges of separation between commercial and investment banking. She describes herself as a "pragmatic, mainstream economist." Administration officials say a key issue in her selection was her ability to get along with Lawrence H. Summers, the deputy Treasury secretary. ''I have enormous respect for Larry,'' she says, noting that he was once her student. ''He is an extraordinarily fine economist, and I am happy to be on the same team.''Heading the San Francisco Fed
Ms. Yellen begins a six-year stint as president of the Federal Reserve Bank of San Francisco, responsible for a region of nine states west of the Rockies. She is credited with lifting the bank's analytical rigor.Early Warnings of a Housing Bubble
Ms. Yellen becomes one of the first federal policy makers to describe rising housing prices as a bubble that might cause economic damage.A ‘Self-Correcting’ Housing Decline
"The speed of the falloff in housing activity and the deceleration in house prices continue to surprise us," Ms. Yellen says at a Fed policy meeting in September. But even she did not believe that the problems in the housing market would have broader consequences. "Of course, housing is a relatively small sector of the economy, and its decline should be self-correcting," she says. Earlier in the year, referring to the departure of the longtime Fed chief, she says it is "fitting for Chairman Greenspan to leave office with the economy in such solid shape" as Ben S. Bernanke succeeds him.Growing Concern, and a Call to Action
Ms. Yellen and two other senior Fed officials say the turmoil in housing and mortgage lending has begun to threaten the overall economy, and she predicts in a speech that the housing decline will probably continue and will impose "significant downward pressure" on consumer spending. At a meeting of Fed policy makers later that month, she says the Fed should act pre-emptively. "We could take a wait-and-see approach to the financial shock, incorporating its impact on our growth forecasts only after we observe its imprint in the spending data," she says. "But such an approach would be misguided and fraught with hazard because it would deprive us of the opportunity to act in time to forestall the likely damage.”Calling a Recession
In the weeks after the collapse of Lehman Brothers at the peak of the financial crisis, Ms. Yellen becomes the first Fed official to say the nation has entered a recession. "The U.S. economy appears to be in a recession," she says. "This is not a controversial view.”'Extended Period of Stagnation'
Ms. Yellen, who holds a rotating vote on the Fed’s policy-making committee, is a consistent vote in favor of Mr. Bernanke’s efforts to stimulate the economy. In January, she warns that the economy could face an “extended period of stagnation," adding that "the current downturn is likely to be far longer and deeper than the 'garden-variety' recession" in which gross domestic product "bounces back quickly."
Ben S. Bernanke, center, the Federal Reserve chairman, with the Fed board, including Ms. Yellen, at a meeting in March 2009. Federal Reserve BoardBacking an Expansion of Stimulus
Ms. Yellen backs the expansion of the Fed’s first round of bond buying, known as quantitative easing. “I believe that the seriousness of our current economic problems argues for using all available tools," she says, "including the purchase of Treasuries, agency debt and agency-backed securities, along with lending programs — some joint with Treasury — to support a range of private credit markets.”
In a February 2010 speech, Ms. Yellen tied a sharp increase in worker productivity to the slow growth in employment. Sandy Huffaker/Bloomberg via Getty ImagesForeseeing a Jobless Recovery
Ms. Yellen says in a speech that the United States faces the prospect of a jobless recovery, with painfully slow employment growth and the economy not operating at its full potential until 2013. Citing the lag between potential and actual output, Ms. Yellen says unemployment should be lower than it is; she cites an increase in business efficiency and labor productivity as the cause.
No. 2 at the Fed
Ms. Yellen is nominated as vice chairwoman of the Federal Reserve, the second-highest-ranking official. "I am strongly committed to pursuing the dual goals that Congress has assigned us: maximum employment and price stability,” Ms. Yellen says after being nominated. “If confirmed, I will work to ensure that policy promotes job creation and keeps inflation in check.” She is confirmed in September.Supporting an Activist Fed, Despite Risks
In her first speech after being sworn in as vice chairwoman, Ms. Yellen acknowledges that the expansionary monetary policy of holding interest rates low to stimulate the economy, as the Fed has been doing for more than two years, "could provide tinder for a buildup of leverage and excessive risk-taking in the financial system." But she does not say that such risks should deter the Fed from resuming purchases of government debt to prop up the flagging recovery.
In
a speech to the Economic Club of New York in April 2011, Ms. Yellen
said the economy still needed the Fed's stimulus measures.Mark Lennihan/Associated PressDefending a Second Round of Bond Buying
In the face of skepticism about the Fed’s plan to buy $600 billion in Treasury securities to stimulate the recovery, its second round of quantitative easing, Ms. Yellen offers a staunch defense of the program. “It will not be a panacea, but I believe it will be effective in fostering maximum employment and price stability,” she says, referring to the two parts of the Fed’s legal mandate.Commitment on Long-Term Goals
The Fed for the first time publishes a statement of its long-term goals, formalizing its longstanding commitment to maintain inflation at about 2 percent a year. The Fed also says it is equally committed to minimizing unemployment. Ms. Yellen leads the drafting of the statement and builds internal support for its release, realizing a long-held ambition that she and Mr. Bernanke have to increase the power of Fed policy by speaking more clearly about its intentions.Acknowledging Mistakes
Ms. Yellen states in a speech that the Fed failed to provide sufficient economic stimulus in the immediate aftermath of the recession, and she suggests that it is looking for new ways to ramp up its efforts. "In effect there has been a significant shortfall in the overall amount of monetary policy stimulus since early 2009” relative to those standards, she says.
In
a speech at the University of California, Berkeley, in November 2012,
Ms. Yellen spoke of pairing the Fed's inflation goal with a specific
employment goal.Robert Galbraith/ReutersTying Fed Policy to Unemployment
Ms. Yellen says she is “strongly supportive" of tying policy to a specific economic objective, "a zone of combinations of the unemployment rate and inflation." The following month, the Fed says that it will hold short-term rates near zero at least as long as the unemployment rate remains above 6.5 percent. A few months later, in March 2013, she discusses the perils of long-term unemployment in a speech to the National Association for Business Economics.Show of Support for Women
Asked whether the economics profession, and central banks, need more women in positions of power, Ms. Yellen says that is “something we’re going to see increase over time, and it’s time for that to happen.”Support From Senate Democrats
After President Obama signals that Mr. Bernanke will not be renominated at the end of his term, Mr. Summers is widely reported to be the White House favorite among potential successors. But his prospective nomination quickly proves contentious on Capitol Hill, and one-third of the 54-member Senate Democratic caucus sign a letter to Mr. Obama calling on him to choose Ms. Yellen.
In
a letter to the president, Mr. Summers said that he had "reluctantly
concluded that any possible confirmation process for me would be
acrimonious and would not serve the interests of the Federal Reserve,
the administration or, ultimately, the interests of the nation’s ongoing
economic recovery." Mr. Summers’s withdrawal quickly reinvigorated
supporters of Ms. Yellen.Alex Wong/Getty ImagesSummers Steps Aside
Mr. Summers withdraws from consideration as Fed chairman, leaving Ms. Yellen as the front-runner by default.
Obama's Choice for the Fed
President Obama nominates Janet L. Yellen as Fed chief, ending an unusually public search. He calls her “one of the nation’s foremost economists and policy makers.” If confirmed, she will be the first woman to run the central bank.
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