Yesterday, President Obama nominated Janet Yellen to become the head of the U.S. Federal Reserve. Senate Democrats welcomed the nomination and Yellen appears to be more than qualified for the job.
Yellen has the chops to potentially be a great follow-up to the current Reserve chair, Ben Bernanke. The most promising aspect of Yellen’s resume is her uncanny ability to predict economic trends. She was nearly alone in December 2007 as she warned about the economic collapse that occurred nearly a year later in 2008. Fourteen Fed policymakers made over 700 predictions between 2009 and 2012. Of those 14, Yellen made the top of the list in accuracy.
“The possibilities of a credit crunch developing and of the economy slipping into a recession seem all too real,” Yellen said of the impending collapse.
Unlike former Fed Chair front runner Larry Summers, Yellen is not a Wall Street puppet. Summers was a staunch supporter of bank deregulation, whereas Yellen is speculated to be tough on Wall Street banks. After a review of several years of catalogued speeches, transcripts, and testimonies, the Center for Public Integrity said that “Yellen now appears determined to ensure that banks fortify themselves against financial shocks and that regulators have the power to police the system.”
One other hopeful aspect is how Yellen will approach banking regulation. A lot of other news and information sources note that Yellen would be tough on Wall Street banks, but isn’t expected to pursue “revolutionary change,” like Sen. Elizabeth Warren (D-Mass.). Yellen doesn’t support breaking up Wall Street banks, but her tactic is to keep banks from becoming too big to fail and “appears more willing to take strong action to stop banking giants from putting taxpayers at risk.”
Yellen herself, however, hasn’t spoken directly to how she will approach banking regulation, which will undoubtedly be one of the main questions among the more economically-progressive Senate Democrats. And amid this intense financial climate, it’s important that she approach banking regulation seriously and not be so terribly fixated on strict numbers. That issue could actually be a tipping point of sorts.
On paper, Yellen is a great choice. She’s smart, understands economy and it’s direction, not to mention she’s married to a Nobel Prize-winning economist. But the one little thing is exactly how she will go about bank regulation.
