While some are rejoicing over President Barack Obama’s nomination of Janet Yellen to succeed Ben Bernanke as head of the Federal Reserve, many conservatives are leery of her economic policies.
In introducing Yellen Wednesday afternoon, Obama referred to her as a “proven leader,” adding, “She understands the human cost when people can't find a job.”
Yellen, who is currently holds the No. 2 spot at the Fed, is widely regarded as a “dove” on economic policy, stressing the need to use the Fed’s power to boost growth and reduce unemployment while disregarding any concerns about igniting inflation down the road.
Her dovish point of view came through in her brief remarks Wednesday. Yellen said more needed be done to strengthen the economy, but added, “We have made progress. The economy is stronger, and the financial system is sounder.”
Mark Calabria, director of financial regulation studies at the Cato Institute, in an interview on Fox Business Wednesday, said he believes Yellen will continue the Federal Reserve’s current strategy, which has been to “create a weak dollar, believing that will increase U.S. exports and increase jobs indirectly.” This type of thinking, he said, led to the housing bubble in 2003 and 2004.
In a column last month on the Cato Institute website, Calabria expressed concern over Yellen’s policies during her tenure as president of the Federal Reserve Bank of San Francisco: “If you think bubbles are a great avenue for wealth creation, then Yellen is the Fed chair for you. If you, however, suspect bubbles are damaging to our economy, then you might rightly be concerned that she repeats her San Francisco performance on a national level.”
Before selecting Yellen, Obama first considered former Treasury Secretary and chief White House economic adviser Lawrence Summers for the post. But Summers withdrew from consideration after encountering widespread opposition over his temperament and past support for bank deregulation.
Despite some opposition from Republicans, Yellen is expected to be have enough votes in the Democratic-controlled Senate for confirmation and take over for Bernanke when his term expires on Jan. 31, 2014.
Yellen has years of experience in central banking, having served as an appointed member of the Federal Reserve System’s Board of Governors from 1994 to 1997, and as chair of President Bill Clinton’s Council of Economic Advisers after that. She also will not “rock the boat,” as chief economist at DMJ Advisors David Jones put it. Her polices reflect those of Bernanke’s, who also favors federal money creation.
But the habit of creating money is a dangerous game, according to Warren T. Brookes of the Competitive Enterprise Institute. He said Yellen is “the minimum-controversy, status quo choice,” but added that just means more of a bad thing.
“It’s a testament to the nature of our times that both leftists and Wall Street prefer not to have a Fed chief dedicated first and foremost to preserving the value of the dollar, Brookes said. “Putting off the day of reckoning is always the first choice of our dysfunctional political system, which will only make the eventual crisis even worse.”