President Barack Obama recently nominated Janet
Yellen, vice chair of the Federal Reserve’s Board of Governors, to succeed Ben
Bernanke as chair of the Federal Reserve when his term ends in January.
Yellen, who served as chair of the Council of
Economic Advisors under President Bill Clinton, started her career at the
Federal Reserve as an economist in the early 1970s. If her nomination is
confirmed by the Senate, she will become the first woman to head the central
bank in its 100-year history.
How could Yellen affect economic policy and
the Fed? We asked two DePaul University business professors to share their
Junkus, a professor of finance, has taught at DePaul since 1987. Her expertise
centers on international finance and the history of the financial markets. Lamont
Black joined the business
school’s finance faculty as an assistant professor this fall. He previously
served as an economist for the Board of Governors of the Federal Reserve. His
research focuses on banking, corporate finance, international finance and macroeconomics.
Q: What do you think the choice of Janet
Yellen signals about the future of the Federal Reserve and U.S. economic
Joan Junkus (JJ): Since
part of the objection to (Larry) Summers’ appointment was his perceived
closeness to Wall Street, the choice of Yellen seems to be an affirmation of
the White House’s recent actions on getting tough on Wall Street. The SEC (Securities
and Exchange Commission) is much more active in prosecuting insider trading and
other cases, and her appointment seems to add to that signal.
However, Yellen has at times emphasized employment
issues over inflation fears, and I think the Fed will be more dovish on
monetary policy under her rule. Certainly, she’s been very careful and
deliberate in her speeches and commentary, so I think she will try to simplify
the Fed’s communications about future actions in order to avoid surprises.
Lamont Black (LB): Janet Yellen is highly respected among
the Federal Reserve economists in D.C., as is Chairman Bernanke. Most
importantly, I believe that she will bring consistency in monetary policy
during this time of transition. There is some debate about whether Ms. Yellen
is more of a “dove” or a “hawk” than Mr. Bernanke. I think the similarities
between them are much greater than the differences.
Q: If confirmed, what do you think Yellen’s
main priorities will be? What should they be?
Yellen’s main priority in the first part of 2014 will be the economic recovery.
With the fiscal problems in Washington, monetary policy will continue to play
an important role in supporting economic activity. However, at some point, she
will need to begin to “taper” the Fed's quantitative easing program. I think
this will be Ms. Yellen’s most defining moment. She will be focused on winding
down the Federal Reserve balance sheet without causing the recovery to stall.
JJ: Her major problem will
be determining the time when the Fed takes away the punchbowl from the party,
always a thankless task. I think she’s going to err on the side of later rather
than sooner, so there’s a higher probability that inflation could become a
I think one of her major priorities should be to shift
the economic focus back to fiscal policy. For most of the last five years, by
necessity, the Fed and monetary policy have been the big influence on the
economy. While there’s not much personally she could do to get the legislative
branch to do its economic duty, I think she should start pressing for a much bigger
role for fiscal policy going forward. Leaving the Fed in sole charge of the
economic outlook was never supposed to happen. Taxes and spending are really
important, and she should try to focus the conversation back to that big
Q: If confirmed, Yellen will be the first
woman to head the Fed. Do you think her appointment will inspire more
young women to go into banking and finance and/or aspire to be a future Fed
JJ: Seeing a woman in that
role is inspiring. Like (former Secretary of State) Hillary Clinton, she will
be a role model who shows that a woman can handle the big issues and formulate
policy at the highest levels. It’s always good to see a woman being the
smartest guy in the room. Also, the contrast between her style and Summers’
says that you can be a leader without necessarily being macho.
That said, I think the discussion leading up to her
nomination was truly revealing. Commentators said she lacked the “gravitas” to
lead the Fed. A Wall Street Journal op-ed piece about her invoked gender
politics and spoke of Nancy Pelosi “bellowing” her support for Yellen. So
Yellen’s appointment can also serve as a useful dash of cold realism about what
it takes to be a female leader.
Ms. Yellen sets a powerful example for other women interested in the field of
finance. The field of finance is not always an inviting place for young women,
so I hope this will encourage more women to “lean in” as they consider a future
career in finance.