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Economy & Business

Obama To Nominate Yellen To Lead Federal Reserve


It's MORNING EDITION from NPR News. Good morning. I'm Renee Montagne.


And I'm Steve Inskeep.

President Obama has decided to nominate Janet Yellen as the next chairman of the Federal Reserve. If the Senate approves, she will replace Ben Bernanke, whose term expires in January.

MONTAGNE: Yellen's nomination has been widely expected since an early favorite, Larry Summers, withdrew in the face of opposition. She would be the first woman to lead the Fed, and she would also provide continuity.

INSKEEP: That's because Yellen has already been a key player in the Fed's efforts to bring the economy back to health.

NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: Janet Yellen has appeared to have something of a lock on the job of Fed chair for weeks. President Obama was under considerable pressure to name her from women's groups and from many liberals, who wanted someone not tied to the deregulatory policies of the past, as Summers was perceived to be. Yellen also had the support of some of the country's most prominent economists, such as Yale University's Robert Shiller.

ROBERT SHILLER: First of all, she has immense experience. She was CEA chair, Council of Economic Advisers; she was vice chairman of the Fed. On top of that, I think she's just a person that I admire for character. She's a good person. She's compassionate and thinks about people. And I think she's going into this job for the right motives.

ZARROLI: As Fed chair, Yellen would bring a sense of continuity to the job. She has spent much of the past two decades as a top Fed official, including a stint as president of the San Francisco Federal Reserve, and she has been a key player during the tumultuous years since the financial crisis.

Former Fed member Alan Blinder says even before 2008, Yellen had expressed concern about the imbalances building up in the economy.

ALAN BLINDER: She was seeing things happening in the mortgage market that worried her greatly and she was urging the board in Washington - she was then in San Francisco - to take actions against it.

ZARROLI: Blinder says once the crisis erupted, Yellen argued early on to bring interest rates down. She has also been a key supporter of some of the extraordinary measures the Fed has taken over the past few years to revive the economy, such as its massive purchases of long-term Treasury bills. And Yellen has been a big force behind greater openness at the Fed, such as its decision to signal future moves of short-term interest rates.

In a recent speech at Berkeley, where she taught for many years, Yellen said greater openness would give the public a solid basis for borrowing and spending decisions.

JANET YELLEN: In my view, such credibility can be achieved only if the public understands the FOMC's objectives and intentions.

ZARROLI: Yellen was born in New York City and is married to the Nobel Prize-winning economist George Akerlof. They have one son, also an economist. Yellen has her critics. Republican Senator Bob Corker of Tennessee voted against her appointment as vice chair, saying she was too dovish about inflation, too willing to keep interest rates low for too long. And Corker released a statement yesterday suggesting he would oppose her again. Alan Blinder says Yellen has indeed argued for keeping interest rates low, but he says her dovish image is exaggerated.

BLINDER: What I emphasize is that it's a situational dovishness. Back in the '90s, she looked kind of hawkish when Alan Greenspan was holding interest rates so low for so long. Right now she looks dovish because she's pushing - has been pushing for these extraordinary policies.

ZARROLI: And he says, given the continued weakness in the economy and low inflation, Yellen was correct to support those policies.

In that sense, he says, Yellen's views have hewed closely to those of the man she's replacing, Ben Bernanke. And her nomination, if approved, would bring a kind of stability to the Fed at a time when the economy continues to face big challenges.

Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.