Janet Yellen Likely New Fed Chairwoman: Hold the Cheers
by Stephen Lendman
On January 31, current Fed chairman Bernanke’s term ends. He’s expected to step down.
Larry Summers was favored to succeed him. If Yellen’s chosen, she’ll be the first woman to hold the post.
Word was Obama intended to appoint Summers. Opposition sentiment forced his withdrawal.
A previous article discussed his deplorable record. Greg Palast calls him the “Typhoid Mary of Economics.” He’s that and much more. Hold the cheers for Yellen. More on her below.
Palast wrote about Summers years ago. He called him “a colony of aliens sent to Earth to turn humans into a cheap source of protein.”
The 1973 science fiction film Soylent Green depicts a dystopian future. It reflects overpopulation, depleted resources, pollution, climate problems and dying oceans.
People survive on depleting plankton supplied soylent green food rations. Human remains become substitutes.
Obama favored Summers. Doing so shows which side he’s on. Monied interests own him. Whatever they want they get. As Clinton’s Treasury Secretary, Summers prioritized banking deregulation.
He ignored industry fraud. He supported greater consolidation. He promoted anything goes. He spearheaded Glass-Steagall repeal.
He thwarted Clinton’s Commodity Futures Trading Commission head Brooksley Born’s efforts to regulate financial derivatives.
He campaigned for passing the Commodity Futures Modernization Act. It deregulated derivatives trading. It legitimized swap agreements and other hybrid instruments.
It’s one of the root causes of today’s financial disaster. It ended derivatives and leveraging regulatory oversight. Doing so unleashed a tsunami of trouble.
It rages out-of-control. It more than ever turned Wall Street into a casino. It steals public wealth. It facilitates fraud. It does so on an unprecedented scale.
Nothing ahead suggests change. Fed policy reflects business as usual. On September 16, the Wall Street Journal headlined “Yellen Is Now Top Fed Hopeful. White House Leans to Vice Chairwoman After Summers’s Withdrawal From Consideration.”
On Monday, White House press secretary Jay Carney said nothing will be announced this week. Obama’s “on track to name his Fed nominee this fall.” It arrives Sunday, September 22.
According to the Journal, congressional Democrats and “liberal groups” led the fight against Summers’ appointment.
“Privately, Mr. Obama’s aides have said for weeks that Mr. Summers was the president’s preferred choice.” He looked sure to be chosen.
Yellen’s been vice chairwoman since October 4, 2010. Her supporters prefer her mostly because she’s not Summers.
Critics say she’s much like Bernanke and Greenspan. She supports whatever pleases Wall Street and financial markets.
She endorses easy money and deregulation. Her record shows little interest in curbing speculative excesses. She’s comfortable about greater industry consolidation.
It takes a leap of faith to believe she’ll change current Fed policy. She’ll continue what’s agreed on now. Her record reflects it. She’s a prototypical insider.
At the same time, she’s not ideologically driven. She’s not hardline. She lived through the stagflationary 1970s. High short rates were imposed to curb it.
On April 11, 2011, she addressed the Economic Club of New York, saying:
“The FOMC is determined to ensure that we never again repeat the experience of the late 1960s and 1970s, when the Federal Reserve did not respond forcefully enough to rising inflation and allowed longer-term inflation expectations to drift upward.”
“Consequently, we are paying close attention to the evolution of inflation and inflation expectations.”
As Fed chairwoman, don’t expect her to raise interest rates soon. From February 1997 – August 1999, she was Clinton’s Council of Economic Advisors chairwoman.
From June 2004 – October 2010, she was Federal Reserve Bank of San Francisco president. On October 4, 2010, she was appointed Fed vice chairwoman. She currently serves in this capacity.
She supported around $4 trillion of reckless quantitative easing (QE). It wasn’t used for economic growth. It bailed out Wall Street crooks.
It fueled speculative excess. It did so at near-zero interest rates. It facilitated greater industry consolidation. Former Troubled Asset Relief Program (TARP) head Neil Barofsky estimated around $23.7 trillion given bankers.
Where did the money go, he asked? Fed officials like Yellen did nothing to curb outright fraud. She and other FOMC members let Wall Street steal with impunity.
Mismanagement, criminal complicity, and reckless indifference substituted for real reform.
Talk now focuses on Fed tapering. Don’t expect much going forward. Tweaking better explains.
QE will continue for some time. Last May, Dallas Federal Reserve Bank president Richard Fisher said “I don’t want to go from wild turkey to cold turkey. I think we ought to dial back” modestly.
Wall Street, hedge funds, other major investors, and high net worth households are addicted to easy money. Don’t expect Fed policy to disappoint.
According to the Journal, Yellen’s “had a hand in crafting the Fed’s bond-buying programs and its commitments to keep short-term interest rates near zero.”
If she becomes Fed chairwoman, “it would likely be seen as a sign of” central bank continuity. According New York University Professor Mark Gertler:
“Yellen is highly experienced, has consistently shown good judgment, and has the temperament as well as the broad respect within the central banking community to ably manage the Fed.”
“She would be the proverbial steady hand and represent a smooth transition from Bernanke.”
She’s University of California Berkeley Hass School of Business Professor Emeritus. She’s a Yale University Economics PhD.
Prior to becoming Clinton’s Council of Economic Advisors president, UC Berkeley lists positions she held as follows:
- Fed Board of Governors member (1994 – 1997)
- UC Berkeley Hass School of Business Professor (1985)
- 1982-1985 Associate Professor, Haas School of Business, UC Berkeley
- 1980-1982 Assistant Professor, Haas School of Business, UC Berkeley
- 1978-1980 Lecturer, London School of Economics and Political Science
- 1977-1978 Economist, Division of International Finance, Trade and Financial Studies Section, Board of Governors of the Federal Reserve System
- 1971-1976 Assistant Professor, Department of Economics, Harvard University
- 1974 Research Fellow, Massachusetts Institute of Technology
Her external service and assignments included:
- Vice Chair, Federal Reserve Board of Governors
- President and CEO, Federal Reserve Bank of San Francisco
- Fellow, American Academy of Arts and Sciences
- Vice President, Western Economics Association
- Fellow, Yale Corporation
- Member, National Academy of Sciences Panel on Ensuring the Best Presidential Science and Technology Appointments
- Research Associate, National Bureau of Economic Research
- Advisory Board, Center for International Political Economy
- Advisory Board, Brookings Panel on Economic Activity
- Chair: Economic Policy Committee of the Organization for Economic Cooperation and Development
- President’s Interagency Committee on Women’s Business Enterprise
- Member and adviser: Brookings Panel on Economic Activity (senior advisor); Advisor Panel in Economics, National Science Foundation
- Advisor: Congressional Budget Office
- Research fellow: Yale University, and Massachusetts Institute of Technology
It bears repeating. She’s a consummate insider. She’s part of a dirty system. For many years, it’s transferred enormous amounts of public wealth to bankers, other corporate favorites and rich elites.
It’s done it at the expense of popular interests. Don’t expect Yellen to change things. Business as usual remains policy.
On September 18, Naked Capitalism‘s Yves Smith headlined “Why You Should Not Be Enthusiastic About Janet Yellen as Fed Chairman,” saying:
Today’s Fed is “a citadel for orthodox-thinking. It’s “entirely mainstream.” It maintains “hold over policy.”
Obama supports business as usual. Bernanke’s been Fed chairman since February 2006. Smith calls him Greenspan on steroids.
Yellen supported numerous bad policies. She backed repealing Glass-Steagall. She endorsed NAFTA. She pressured government policy makers to “develop a new statistical metric intended to lower” Social Security payments.
She did so by wanting the consumer price index (CPI) more corrupted than already. Since the 1980s, it’s been fraudulently manipulated. Doing so makes inflation look artificially lower.
In 1998, she supported cap and trade. Obama failed to get legislation passed to institute it. Doing so would be a bonanza for Wall Street.
It would do so through carbon trading derivatives. Potentially it would be a multi-trillion dollar market. Whatever benefits bankers, Yellen supports. She’s soft on anti-trust policy.
Her accomplishments are greatly exaggerated. Tout TV pundits claimed “she was one of the economists who recognized (a) housing bubble forming,” said Smith.
FOMC minutes “show no such thing.” At most, Yellen called housing prices potentially too high. “She missed the bubble like everyone else in the cloistered Fed.”
According to market analyst John Hussman:
“We now face the prospect of Janet Yellen, who in October 2005, at the height of the housing bubble, delivered a speech effectively proposing that monetary policy could mitigate any negative economic consequences of a housing collapse, and arguing that the Fed had no role in preventing further housing distortions:
” ‘First,’ she said, ‘if the bubble were to deflate on its own, would the effect on the economy be exceedingly large?’ ”
” ‘Second, is it unlikely that the Fed could mitigate the consequences?’ ”
” ‘Third, is monetary policy the best tool to use to deflate a house-price bubble?’ ”
” ‘My answers to these questions in the shortest possible form are, ‘no,’ ‘no,’ and ‘no.’ “
She claimed higher than normal prices didn’t reflect bubble trouble. They could be high for fundamentally good reasons. Greenspan said much the same thing.
He fueled the bubble on his watch. He let housing prices become an $8 trillion wealth monster. He had regulatory authority to prevent it. He ignored his fiduciary responsibility. He did so to enrich Wall Street.
He blamed the bubble on success, saying:
“The tectonic shift in the early 1990s by much of the developing world (away) from central planning to increasingly dynamic, export-led market competition.”
The result was a surge (in growth). It “led to an excess in savings.” Doing so “propelled global long-term interest rates progressively lower between 2000 and 2005.”
Market analyst Jeremy Grantham called Greenspan’s policies “immoral hazard.”
“It’s not that the former Fed boss was incompetent that is remarkable,” he said. It’s that “so many people (still) don’t seem to get it.”
His policies were “rudderless.” They lacked “vision, leadership and backbone.”
Bernanke’s been Greenspan on steroids. Yellen supports the worst of their policies. Hold the cheers. Business as usual will continue on her watch.
Stephen Lendman lives in Chicago. He can be reached at email@example.com.
His new book is titled “Banker Occupation: Waging Financial War on Humanity.”
Visit his blog site at sjlendman.blogspot.com.
Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.
It airs Fridays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.