Janet Yellen cruised through her Senate Banking Committee confirmation hearing today without a stumble, strengthening her already strong chance to become the next chief of the Federal Reserve.
Yellen, currently the Fed’s vice chairman, handled challenges from the left and the right with equal aplomb. Most of the questioning was deferential, although Senator Richard Shelby, the Alabama Republican who opposed her nomination as vice chairman in 2010, cut her off twice. Liberal Democrats complained that the Fed’s massive bond-buying program amounted to “trickle-down” economics that mainly helped the wealthy, while conservative Republicans said the Fed was pumping up bubbles and keeping the economy on a “sugar high” and a “morphine drip.” Yellen had obviously rehearsed replies to both criticisms, and if the answers did not persuade her questioners, at least they showed she was aware of the Fed’s dilemmas.
Shelby tried to link the Fed’s bond-buying to James Tobin, the late liberal economist from Yale who was Yellen’s PhD adviser, and to John Maynard Keynes, the 20th century British economist hated by the right. Yellen replied that quantitative easing was supported by “Tobin and Friedman”—meaning Milton Friedman, the libertarian economist who is a hero to conservatives. Shelby pressed: “What about Keynes?” Yellen replied, “I don’t know that Keynes thought about that.” Which is true: Keynes was a believer in fiscal stimulus more than monetary measures.
Yellen’s most stilted exchange was probably the one with Senator Joe Manchin, a West Virginia Democrat. He tried to paint Yellen as a supporter of balanced budgets, even though earlier in the hearing she had said the economy was too weak to sustain rapid retrenchment. Manchin pointed out that Yellen had served as chief economic adviser to President Bill Clinton, who briefly achieved budget surpluses at the end of his time in office. Yellen could have pointed out that she and Manchin weren’t exactly on the same page. Instead, she tried to find areas of agreement, saying that achieving “debt sustainability over the medium term” would be a good thing. Manchin urged her to lecture Congress on fiscal responsibility, ending with an exhortation: “Be bold. Be bold.”
The liberals on the Senate panel, including Democrat Elizabeth Warren of Massachusetts, are sure votes for Yellen, but they used the hearing to get her on record on their pet issues. Warren faulted the Fed for leaving some regulatory issues to the staff. Yellen replied that she believes bank supervision and regulation are as important as monetary policy.
Sitting behind Yellen in the audience was her husband, George Akerlof, a Nobel Prize-winning economist. Not that she needed anyone whispering in her ear. The hearing ended on a high note for Yellen when Senator Chuck Schumer, the Democrat from Brooklyn, told her, “I think you’ll make a great chair and your Brooklyn roots shine through.” Replied Yellen: “Thank you. I never forget where I came from.”