Over the weekend, Clinton-era treasury secretary Larry Summers revealed that he was no longer seeking the position of Federal Reserve chairman to replace Ben Bernanke, who is expected to retire soon. The seemingly obvious choice is now Janet Yellen, whose name has been floated alongside Summers’ since last year.
While it is possible that Obama will surprise us with some other nominee (The Atlantic suggests that Donald Kohn, a former Fed vice chairman, might be one such surprise), liberal pundits are lining up in support of Yellen. Most of the arguments supporting her laud her semi-subtle stance against inequality and her X chromosomes. Paul Krugman used part of a column to lambast Yellen’s critics as spiteful, and devoted the rest to humbly declaring that there are “no honors I desperately desire that I don’t already have.” Senator Elizabeth Warren of Massachusetts, who MSNBC is now affectionately referring to as “Liz,” openly expressed her support for Yellen and her opposition to Summers. And Time told us “5 Things Everybody Should Know About Janet Yellen” (channeling a 14-year-old girl in a lede which reads “well, probably”), including that she is “not a creature of Wall-Street,” that she has a “(relatively) good track record of economic predictions,” and—in case any of us forgot—she’s a woman!
But aside from the choir of voices calling out for Yellen’s coronation, what can we expect in terms of monetary policy out of a Yellen-helmed Federal Reserve? Well, Yellen has declared that she is not afraid of inflation, and that she would like to see even-easier monetary policies than those under Bernanke. She can be classified as a neo-Keynesian, meaning that she sees government spending as an appropriate means of softening a recession, while quixotically admitting that the central bank is most likely responsible for the creation of the very business cycles that it exists to counteract. And she’s not as prescient as some would have us believe—as late as April of 2007, she was praising federal efforts in low-income community engineering, particularly the Community Reinvestment Act, which many believe was a major cause of the housing bubble. In 2005 she acknowledged the bubble, but advocated that the Fed limit its efforts to counteract it.
So, in short, what can Americans expect from Janet Yellen if she’s appointed? More of the same, maybe even some bubble trouble, but at least no surprises.