Federal Reserve Chairman, Ben Bernanke, is set to abandon his post in January and the hunt is on for his successor. In the above CNBC video interview, The Wall Street Journal’s Jon Hilsenrath talks to Larry Kudlow on the potential candidates.
At this stage, Vice Chairwomen, Janet Yellen, is odds on favourite to take over from Bernanke. The New York Times last week posted a detailed profile on Yellen, as well as some of the roadblocks she may face in her path to become the most powerful central banker in the world:
Ms. Yellen is now widely viewed as a logical candidate to succeed the current Fed chairman, , when his term ends in January 2014. She has worked closely with him in shaping and building support for the Fed’s campaign to stimulate the economy and bring down unemployment.
But some of Ms. Yellen’s critics remain wary. They worry that she would not be sufficiently concerned about the possibility that inflation will accelerate as the economic recovery gains strength. If nominated, she could face opposition from Senate Republicans who have repeatedly expressed concern that the Fed’s campaign would destabilize financial markets and make controlling the pace of inflation more difficult.
“I think people read Janet Yellen’s speeches as saying that she puts a higher weight on joblessness compared to inflation” than the typical member of the Fed’s policy-making committee, said Vincent Reinhart, formerly the head of the Fed’s monetary policy staff and now the chief United States economist at Morgan Stanley. “And that includes Ben Bernanke.”
He added, however, that her nomination would be unlikely to shake financial markets because she already exercises considerable influence, so any shift in policy would most likely be modest…
If confirmed, Ms. Yellen would become the first woman to lead a major central bank. She is 66, seven years older than Mr. Bernanke. She would be 71 by the end of a four-year term as chairwoman. But she remains in good health, and friends say that, like other prominent women of her generation, she regards herself as being in the prime of a late-blooming career. Nor would she be the oldest person to lead the Fed. Mr. Greenspan began his fifth and final term in 2004 at 78…
Ms. Yellen, born in Brooklyn in 1946, has said that she became interested in economics as a way of thinking logically about how to help people. She studied at Yale under the Nobel laureate James Tobin, a leading proponent of the view that governments could mitigate recessions. Professor Tobin, now dead, told Business Week magazine in 1997 that Ms. Yellen had “a genius for expressing complicated arguments simply and clearly.”
She built an academic career at Berkeley together with her husband, the economist George A. Akerlof, whom she met in a Fed cafeteria. Much of their work together highlighted flaws in the economic theory that markets operate efficiently, a theory that basically treats government policy as inherently costly. Their work showed that government, including central banks, could indeed adopt economic policies that improved people’s lives…
Yellen’s focus on unemployment over inflation suggests that she would maintain the current stance of easy monetary policy and quantitative easing until employment stages a significant recovery.
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