Janet Yellen Federal Reserve Chief Nominated

Photo: Via The New York Times.

Welcome to the new Federal Reserve. White House officials announced last night that President Obama will nominate Janet Yellen as the chairman of the Fed later today. The announcement is expected to come at 3 p.m. this afternoon. The 67-year-old current vice chair, if confirmed, would be the first female leader of the central bank in history. But there's more to her than just her gender, which is not at all insignificant. Here's what you need to know.

Who Is She?
Yellen's served as vice chair of the Fed since 2010, when she was easily confirmed by voice vote in the Senate. A native of Brooklyn, she has also served as the president and CEO of the Federal Reserve Bank of San Francisco and the chair of the White House Council of Economic Advisers under President Clinton, and is professor emerita at the U.C. Berkeley's Haas School of Business. She's married to George Akerlof, a Nobel prize-winning economist who is also a professor emeritus at Berkeley. Yellen also collects stamps, enjoys tennis and hiking, and packs suitcases full of economics books to read on vacation. Seriously.

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Why Her?
As the New York Times notes, Yellen is expected to win bipartisan support in the Senate, though some Republicans, such as Sen. Bob Corker of Tennessee, are wary of her nomination because of "her dovish views on monetary policy." (More on that below.) Both she and current Fed chairman Ben Bernanke have engineered our current expansionary monetary policy — i.e., the stimulus that was re-upped last month — though as chairman she will be expected to wind down that program so that the economy can walk on its own legs, so to speak.

While her approach to the economy isn't wildly different than Bernanke's, her sensibility is. (More on that, too.) But she was, for a time, the underdog candidate to Larry Summers, a former Obama advisor who dropped out of the running last month after pressure from Democrats, who see Yellen's appointment as both historic for women and important for job creation.

What Does "Dovish" Mean?
Yellen and Bernanke are often referred to as "doves" or "dovish" in their policy approaches. In Fed-speak, that basically means that, when considering how to balance the Fed's dual mandate of full employment and low inflation levels, Yellen and her ilk tend to focus more on jobs. Hawks, on the other hand, focus more on inflation. Since the Fed cannot equally balance both needs — if it stimulates the economy by printing money and creating jobs, it risks raising inflation — they have to choose sides. The doves are generally willing to risk small raises in inflation if it lowers unemployment, while the hawks typically want to keep price levels stable with higher interest rates.

Justin Wolfer at Bloomberg, however, doesn't characterize Yellen as a dove. "While it’s true that Yellen has forcefully advocated for more monetary stimulus in recent years, what’s more notable is that she has gotten the big calls right. Those who argued for tighter monetary policy have been proven wrong," he writes. "Yellen’s pragmatic reading of the macroeconomic tea leaves has led her to avoid the errors of her theory-bound colleagues who have seen the threat of inflation around every corner." Basically, he means Yellen isn't looking at the issues facing the Fed as simple number sets or statistics. Kevin Roose at New York magazine calls her approach a "humanist" one, in which she approaches the economy "as a moving, breathing organism, a collection of millions of people who are struggling to make their lives better today than they were yesterday."

About Her "Chairman" Title
That's not a typo. As Roose points out, the title is clearly spelled out in the Federal Reserve Act, gender-appropriate awkwardness notwithstanding. That doesn't mean, of course, that things won't change. But for now, we'll stick to just "chair" in the future.