President Barack Obama will nominate a UC Berkeley business professor committed to lowering unemployment to succeed Ben Bernanke as the head of the Federal Reserve, the White House said Tuesday.
If confirmed, Janet Yellen would become the first woman to lead the American central bank or head a major central bank anywhere in the world.
"Janet Yellen is an excellent choice," said Tom Campbell, dean of the Fowler School of Law at Chapman University and former dean of the Haas School of Business at UC Berkeley. "She is a superb economist. She is an expert in monetary policy. She is a consensus builder. She includes people. The word arrogant is never used in the same sentence as Janet Yellen."
Yellen, a professor emeritus at UC Berkeley's Haas School of Business, had long been considered a logical candidate for the chairmanship because of her economic expertise, her years as a top bank regulator and her experience in helping manage the Fed's polices. Her understanding of the financial system is widely respected: Before the recession struck, she was among a minority of top economists who had warned correctly that subprime mortgages were a severe threat.
On the Fed, Yellen has built a reputation as a "dove" -- someone who is typically more concerned about keeping interest rates low to reduce unemployment than about raising them to avert high inflation. Her nomination could face resistance from congressional critics who argue that the Fed's low-rate policies have raised the risk of high inflation and might be breeding dangerous bubbles in assets like stocks or real estate. Unemployment and labor markets are one of her areas of academic interest.
Still, Yellen has said that when the economy finally begins growing faster and rates need to be raised to prevent high inflation, she would move in that direction.
Yellen, 67, taught thousands of undergraduate and graduate students during her time at Haas School of Business, with courses in macroeconomics and international trade. The skills she honed as a professor would serve her well in this new role, said James Wilcox, a Haas professor.
"It really helps to be able to explain things -- not just to have coherent thoughts but to have effective ways to communicate those thoughts and sometimes persuading people," Wilcox said.
Bernanke's term ends in January, completing a remarkable eight-year tenure in which he helped pull the U.S. economy out of the worst financial crisis and recession since the 1930s. Under Bernanke's leadership, the Fed created extraordinary programs after the financial crisis erupted in 2008. It lent money to banks after credit markets froze, cut its key short-term interest rate to near zero and bought trillions in bonds to lower long-term borrowing rates.
Yellen emerged as the leading candidate after Lawrence Summers, a former Treasury secretary whom Obama was thought to favor, withdrew from consideration last month in the face of rising opposition.
Yellen would likely continue steering Fed policy in the same direction as Bernanke. A close ally of the chairman, she has been a key architect of the Fed's efforts under Bernanke to keep interest rates near record lows to support the economy.
As vice chairwoman since 2010, Yellen has helped manage both the Fed's traditional tool of short-term rates and the unconventional programs it launched to help sustain the economy.
"She's an excellent choice and I believe she'll be confirmed by a wide margin," said Sen. Chuck Schumer, D-N.Y., a member of the Senate Banking, Housing and Urban Affairs Committee.
Key turning point
Obama's choice of Yellen coincides with a key turning point for the Fed. Within the next several months, the Fed is expected to start slowing the pace of its Treasury and mortgage bond purchases if the economy strengthens. The Fed's purchases have been intended to keep loan rates low to encourage borrowing and spending.
If confirmed by the Senate, Yellen would be the first Democrat chosen to lead the Fed since Jimmy Carter picked Paul Volcker in 1979. She would also be the first vice chairwoman of the Fed to ascend to the chairmanship.
Yellen served as a Fed board member for three years in the 1990s before leaving to head the Council of Economic Advisers in the Clinton administration. She also served for six years as president of the Fed's regional bank in San Francisco before Obama chose her in 2010 for the No. 2 spot on the Fed's seven-member board in Washington.
In addition to helping devise the Fed's rate policies, she has been instrumental in carrying out another top priority of Bernanke's -- making the Fed, an institution whose operations were long walled off from the public view, far more open and transparent. The Bernanke-led Fed did so through news conferences, clearer public communications and detailed guidance about the Fed's expectations for the economy and policymaking.
Yellen was born in Brooklyn and graduated from Brown University in 1967 with honors in economics. She met her husband, George Akerlof, in a Fed cafeteria. The two worked together for many years on the Berkeley faculty.
Campbell, the former Haas dean, said Californians should be "thrilled" by Obama's pick. "She has a very firm grasp of the business conditions in California and the West," he said.
Katy Murphy, George Avalos and The Associated Press contributed to this story.
Born: Brooklyn, Aug. 13, 1946
Current title: Professor emeritus of business administration, Haas School of Business, UC Berkeley
2010-present: Vice chairwoman, Federal Reserve Board of Governors
1985-2006: Professor, Haas School of Business, UC Berkeley
2004-2010: President and CEO, Federal Reserve Bank, San Francisco
1997-1999: Chairwoman, President's Council of Economic Advisers
1994-1997: Member, Federal Reserve Board of Governors
1971-1985: Professorships at UC Berkeley and Harvard; lecturer at London School of Economics and Political Science
Education: B.A., economics, Brown University, 1967; Ph.D., economics, Yale University, 1971
Research areas: Unemployment and labor markets, monetary and fiscal policies, international trade and investment policy
Source: UC Berkeley (more at http://newsroom.haas.berkeley.edu/article/janet-yellen-fact-sheet#sthash.vFxYbLUm.dpuf)