Senate Republicans to grill Federal Reserve nominee Janet Yellen
Janet Yellen will face hostile Republicans doubtful of the Federal Reserve’s easy money policies when she appears before senators Thursday to defend her nomination to lead the US central bank.
Yellen, chosen by President Barack Obama to replace Ben Bernanke as Fed chair, is expected be easily approved by the Senate Banking Committee, given its dominance by Democrats.
But the close Bernanke ally will be pressed to justify the Fed’s continuing stimulus program against worries by conservatives that the $85 billion a month asset-buying operation is piling up future risks and liabilities.
And even if the panel approves her, she could still face a delay in the full Senate where at least two Republicans have pledged blocking actions, aimed at extracting other political concessions.
If Yellen, currently Fed vice chair, is however approved, she will replace Bernanke on February 1.
Respected economist Yellen, 67, was nominated by Obama in October after the president’s apparent first choice, former White House advisor Larry Summers, faced strong objections from Senate Democrats as well as Republicans.
Yellen would be the first woman to head the Fed. Obama described her as “exceptionally qualified” to become “one of the most important policymakers in the world.”
Her nomination comes as Fed policymakers themselves are debating whether the stimulus policy known as quantitative easing is still needed to keep the economy growing.
The Fed was expected to begin tailing it back in September, but it held off, seeing weaknesses in growth and also political risks ahead.
On Tuesday three top Fed officials gave differing views on when the taper should happen.
Richard Fisher, president of the Dallas branch of the Fed, suggested an earlier move would be better, while Atlanta Fed chief Dennis Lockhart was more cautious and a third, Narayana Kocherlakota of the Minneapolis Fed branch, said the central bank could even consider adding to its stimulus.
Yellen, who as an academic and a policymaker has a history of being focused on bringing down unemployment, has not weighed in publicly on the debate.
But with last week’s strong numbers on job creation and third quarter economic growth, said Deutsche Bank in a client note, “it will be interesting to see how Fed Chair nominee Yellen views the most recent improvement in the data in her testimony on Thursday.”
The only Fed policy statement since her nomination, on October 30, mostly repeated the cautious sentiment of the previous months and refrained from saying anything that could feed opponents in the Senate.
The Senate Banking Committee is weighted in her favor, with 12 Democrats and 10 Republicans, and none of the Democrats have suggested they would oppose her.
Committee chief Senator Tim Johnson last month called her an “outstanding” choice, commending her “dedication to bringing down unemployment and putting Americans back to work.”
The senior Republican on the committee, Mike Crapo, signaled his concerns — but without saying he would vote against her.
“I continue to strongly disagree with the Fed?s use of quantitative easing, and am eager to learn Ms. Yellen?s vision for the direction of the Federal Reserve as we go through the nomination process.”
Other Republican senators on the committee have been more critical.
“I voted against Vice Chairman Yellen’s original nomination to the Fed in 2010 because of her dovish views on monetary policy,” Bob Corker said last month.
“We will closely examine her record since that time, but I am not aware of anything that demonstrates her views have changed.”
If Yellen does clear the committee, she could still be blocked by parliamentary maneuvers. Republican senator Rand Paul said he will seek to hold up approval in order to force an audit of the Fed.
Senator Lindsey Graham, meanwhile, threatened to stall so that he can get more information on the September 2012 attack on the US mission in Benghazi, Libya, that killed the American ambassador and three others.
Yellen however is expected to be able to muster the support of the 60 senators needed to get past those blocking attempts — and then easily gain full Senate approval.