Fed nominee Yellen says more to be done on jobs, economic recovery

Obama praises outgoing Chairman Bernanke and welcomes Yellen, who would be first woman to hold position

President Barack Obama announces his nomination of Janet Yellen to head the Federal Reserve on Wednesday.
Kevin Lamarque/Reuters

Janet Yellen, vice chair of the U.S. Federal Reserve, said Wednesday that she would focus on getting more Americans back to work, as she was nominated by President Barack Obama to succeed Ben Bernanke as head of the central bank.

"Janet is exceptionally well qualified for this role," Obama said at a White House ceremony, adding that “America’s workers will have a champion in Janet Yellen.”

The president said Yellen combines deep knowledge of economic theory with common sense about how things play out in reality: "She doesn't have a crystal ball, but what she does have is a keen understanding about how markets and the economy work, not just in theory but also in the real world. And she calls it like she sees it."

He added that Yellen understands the kind of pressures that a bad economy puts on American citizens, including stresses on marriages and jobs.

Yellen said the past six years have been tumultuous for the economy and challenging for many Americans suffering from the Great Recession.

"We have made progress, the economy is stronger and the financial system is sounder," but more needs to be done, she said. "Too many Americans still can’t find a job and worry how they’ll pay their bills and provide for their families. The Federal Reserve can help if it does its job effectively."

Saying considerable credit for the economic recovery goes to Bernanke, Yellen said it was a privilege to serve with him and learn from him.

The president also praised the outgoing chairman for guiding fiscal policy during the financial crisis. Bernanke's term ends Jan. 31.

Obama expressed confidence in his nominee, who, if confirmed, would become the first woman to lead the Federal Reserve. She would also be the first woman to head a major central bank anywhere in the world.

The choice of Yellen, 67, coincides with a turning point for the Fed. Within the next several months, it is expected to start slowing the pace of its Treasury and mortgage bond purchases if the economy strengthens. The Fed's purchases have been intended to keep loan rates low to encourage borrowing and spending.

In his speech introducing Yellen, the president observed that she will be the chair of the Federal Reserve even after he leaves office. 

As vice chair since 2010, Yellen has helped manage both the Fed's traditional tool of short-term rates and the unconventional programs it launched to help sustain the economy after the financial crisis of 2007–08. These include the Fed's monthly bond purchases and its guidance to investors about the likely direction of rates.

Yellen has built a reputation as a "dove" — someone who is typically more concerned about keeping interest rates low to reduce unemployment than about raising them to avert high inflation. Her nomination could face resistance from congressional critics who argue that the Fed's low-rate policies have raised the risk of high inflation and might be breeding dangerous bubbles in assets like stocks or real estate.

Sen. Bob Corker, R-Tenn., a member of the Senate Banking Committee, said he voted against her for vice chair in 2010 because of her dovish policies. "I am not aware of anything that demonstrates her views have changed," he said.

Still, Yellen has said that when the economy finally begins growing faster, rates will need to be raised to prevent high inflation, and she will move in that direction.

She has been seen as a safe choice for the president, who first attempted to nominate former Treasury Secretary Lawrence Summers. Summers dropped his bid after mounting pressure from liberal groups who claimed he was not suited to lead the Fed, especially given his support of financial deregulation in the 1990s.

Yellen drew outspoken support from Senate Democrats, a third of whom signed a letter this summer urging Obama to choose her. Last month, more than 350 economists signed a letter to the president recommending the nomination of Yellen.

If confirmed by the Senate, Yellen would be the first Democrat chosen to lead the Fed since Paul Volcker was picked by Jimmy Carter in 1979. She would also be the first vice chair of the Fed to ascend to the chairmanship.

Like Bernanke, she was a distinguished college economics professor before joining the Fed. She taught at the University of California, Berkeley, from 1980 until 1994, when President Bill Clinton chose her to join the Fed's board of governors in Washington. She served on the board until February 1997, when Clinton chose her to lead the White House Council of Economic Advisers.

Al Jazeera and wire services

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