Obama Backs Campus Professor For Federal Reserve Vice Chair


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Alan Blinder on Janet Yellen

Former Vice Chairman of the Board of Governors of the Federal Reserve System and current Professor of Economics at Princeton University Alan Blinder talks about working with UC Berkeley Professor Janet Yellen on the Fed and discusses her qualifications to potentially become the Vice Chairman of the Fed.

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To further efforts aimed at decreasing unemployment, the Obama administration has backed Janet Yellen, UC Berkeley professor emeritus, as the next vice chair of the Federal Reserve Board of Governors.

White House Press Secretary Robert Gibbs confirmed at a press briefing Friday that Yellen-who is currently president and chief executive officer of the San Francisco branch of the Fed-is "a leading contender" for the position currently occupied by Donald Kohn, whose four-year term expires in June. Gibbs said an appointment would be made before June.

According to former colleagues, Yellen, an economic "dove," supports a monetary strategy that emphasizes low interest rates to banks as a measure to reduce unemployment in the current economy, a view in contrast to that of "hawks," who aim to control inflation through higher rates.

David Levine, chair of the Economic Analysis and Policy Group at the Haas School of Business, said he had a different view of Yellen, referring to her as an "owl" for her wisdom and ability to facilitate compromise over economic policy.

"I think she has a very good temperament," said Alan Blinder, a former vice chair of the board and current professor of economics at Princeton University. "She's not a pushover, but it's very easy to reason with her."

Levine added that Yellen can bridge the divide between conflicting factions on the board.

Blinder said the hawk-dove divisions are likely to re-emerge as the debate heats up over the speed at which the Fed will be increasing federal interest rates from what is currently about zero.

According to Levine, the Federal Reserve is responsible for determining short-term interest rates, which dictate how much banks must pay to borrow from each other. The board decisions ultimately affect a wide range of activities in the national economy, such as the mortgage rates on houses.

"During a weak economy like now, it is up to the Fed to keep interest rates low to try and spur investment and get the economy moving again," he said.

Obama may use appointments to the board as an opportunity to further his own economic strategy, according to Blinder. Those appointed to the board can directly influence the interaction between the Fed and banks.

"Recently, the Board of Governors has been involved almost exclusively in the policy aspects of bank supervision and regulation rather than day-to-day execution of the policies," he said. "The board in Washington, when it's at full strength, has seven members and therefore always constitutes a majority of the Federal Open Market Committee, which is the interest rate-setting committee."

Yellen's economic experience at the national level extends beyond her 30-year tenure on campus as a professor of economics and business. During the Clinton administration, she served on the board from 1994-97 and the President's Council of Economic Advisers from 1997-99.

Andrew Rose, a professor at Haas School of Business, said though Yellen may have a lack of experience in the private sector, "she's really well qualified" and "has tons of experience."

"We should be proud because we are associated with her here at Berkeley, and we should be proud as a country that we are appointing such people of her caliber," he said.


Contact Kim Bielak at [email protected]

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