Home' Trinidad and Tobago Guardian : November 21st 2013 Contents BG26 | INTERNATIONAL
BUSINESS GUARDIAN www.guardian.co.tt NOVEMBER 2013 • WEEK THREE
Fed Vice Chair Janet Yellen on
November 14 robustly defended
the Federal Reserve s bold steps
to spur economic growth, calling
efforts to boost hiring an "imper-
ative" at a hearing into her nomination to
become the first woman to lead the US central
Answering questions before the Senate
Banking Committee, Yellen made plain she
would press forward with the Fed s ultra-easy
monetary policy until officials were confident
a durable economic recovery was in place
that could sustain job creation.
"I consider it imperative that we do what
we can to promote a very strong recovery,"
Yellen told the panel.
If confirmed by the Senate, as widely
expected, the former professor and long-time
public servant will become the most powerful
woman in the history of world finance. She
was nominated by President Barack Obama
to succeed current Fed chairman Ben
Bernanke, whose term expires at the end of
Financial markets watched Yellen s per-
formance closely, both for clues on future
policy and to see how she would stand up
under the pressure of the panel s question-
Investors liked what they heard, particularly
her emphasis on the need to drive a stronger
recovery. US stocks rose as she testified, with
the Dow Jones industrials and S&P 500 index
closing at fresh record highs.
US Treasury debt prices also climbed, as
did gold prices, while the dollar held earlier
With her husband, Nobel-Prize-winning
economist George Akerlof, seated behind her,
Yellen appeared poised, calm and well-pre-
pared as she answered and parried some
pointed but respectful questions from the
mostly male committee members.
The hearing largely lacked flashpoints and,
importantly, the seasoned central banker made
no missteps that might have rattled investors.
"This ain t her first rodeo," was the title
of a research note from JPMorgan s Fed watch-
er Michael Feroli.
Yellen, who has served as the Fed s No 2
official since 2010 and who led the San Fran-
cisco Fed before then, has been a strong advo-
cate of the US central bank s aggressive and
unorthodox measures to boost economic
growth and employment.
The Fed has held interest rates near zero
since late 2008 and has quadrupled its balance
sheet to US$3.8 trillion through three massive
rounds of bond purchases. Some Republican
lawmakers worry those actions risk stoking
inflation or asset bubbles, concerns that were
aired at the hearing.
"I think the economy has gotten used to
the sugar you ve put out there, and I just
worry that we re on a sugar high," said Senator
Mike Johanns, a Republican from Nebraska.
Yellen admitted the bond buying, or quan-
titative easing, could not continue forever
and said the Fed was acutely aware the pro-
gram had costs as well as benefits.
But she said the benefits outweighed the
costs right now, and made clear there was
no set timetable for reducing the Fed s current
US$85 billion per month pace of purchases,
saying any decision would be driven by eco-
"I do not see the programme as continuing
indefinitely," Yellen said. "We ... are attempting
to assess whether or not we have seen mean-
ingful progress in the labor market. And what
the (Fed s policy) committee is looking for is
signs we will have growth that is strong
enough to promote continued progress."
Yellen said she did not believe that US
stocks or the housing market were in bubble
territory, and assured the panel that the central
bank would focus intently to spot any risky
investment behavior before financial stability
"I absolutely believe that our supervisory
abilities are critical, and they re just as impor-
tant as monetary policy," she said.
Yellen also said she would not rule out
using monetary policy to prick future bubbles,
although she said it was a blunt tool that
should only be used when regulatory measures
The banking committee, where Democrats
occupy 12 of the 22 seats, needs to vet Yellen s
credentials before sending her nomination to
the full Senate for consideration.
A committee aide said the panel could vote
on Yellen as early as this week, although a
senior Democratic aide separately said the
full Senate would not be able to vote before
the Thanksgiving holiday at the end of the
Despite worries among some Republicans
that she might not be tough enough on infla-
tion and asset bubbles, she is expected to
easily win confirmation.
Obama s Democrats and their allies control
55 of the Senate s 100 seats, which means the
67-year-old former economics professor needs
to win backing from only five Republicans to
reach the 60-vote threshold necessary to
overcome any procedural hurdles.
The hearing, which lasted a little over two
hours, featured little of the hostile rhetoric
that Tea Party conservatives frequently level
at the Fed, which they argue has enabled
loose spending in Washington by keeping the
government s borrowing costs so low.
Including her prior stint at the San Francisco
Fed and an earlier one on the Fed s Washington
board, Yellen has served as a policymaker at
the central bank for nearly 12 years.
At one point, Senator Bob Corker, a Repub-
lican from Tennessee and a critic of the Fed s
current policies, went out of his way to point
out she had never voted against an interest
rate hike - offering her an opportunity to lean
against perceptions she is too dovish.
Corker voted against Yellen s nomination
as Fed vice chair in 2010 and his office has
previously said he would vote against her
Too big to fail
One Republican panel member, Senator
David Vitter of Louisiana, said he would vote
"no," in part because he did not believe Yellen
would do enough to tackle the problem of
banks that are so big they could threaten the
"She made it crystal clear today that she
would continue the Fed s current policies of
continuing Too Big To Fail and free money,
quantitative easing, with no wind down in
sight," he said in a statement.
For much of the hearing, lawmakers grilled
Yellen about the Fed s efforts to guard against
a repeat financial crisis.
She defended the central bank s current
course of pushing for higher capital and liq-
uidity at the biggest USbanks, which she said
would help make those firms less risky. She
also hinted at additional measures that could
be on the way.
For instance, Yellen said the Fed might issue
new rules for Wall Street s role in commodities
trading once it finishes a review of banks
activities in that area. She also said banks
that rely on short-term wholesale funding
could face additional capital or collateral
Yellen says stronger job
growth a Fed imperative
Fed Vice Chair, Janet Yellen
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