JUDY WOODRUFF: Now more on President Obama’s nomination of Janet Yellen to be chair of the Federal Reserve Bank. The formal announcement came this afternoon.
The White House event capped a prolonged, politically charged search for a successor to Ben Bernanke, whose second term ends in January. Yellen emerged as front-runner after former Treasury Secretary Lawrence Summers withdrew from consideration. The president predicted today she will prove an exceptional choice.
PRESIDENT BARACK OBAMA: She doesn’t have a crystal ball, but what she does have is a keen understanding about how markets and the economy work, not just in theory, but also in the real world, and she calls it like she sees it. Not surprisingly, she’s held in high esteem by colleagues across the country and the world who look to the United States, as I said, and the Fed for leadership.
JUDY WOODRUFF: Yellen is 67, and has been the Fed’s vice chair since 2010. Now she stands to become one of the first women to lead any country’s central bank and, by far, the most prominent woman to do so. She spoke today of the job that lies ahead.
JANET YELLEN, Federal Reserve Chair nominee: The mandate of the Federal Reserve is to serve all the American people. And too many Americans still can’t find a job and worry how they will pay their bills and provide for their families. The Federal Reserve can help if it does its job effectively. We can help ensure that everyone has the opportunity to work hard and build a better life.
JUDY WOODRUFF: The new nominee is a longtime professor at the University of California at Berkeley’s Haas School of Business. She ran the president’s Council of Economic Advisers during the Clinton administration and later served as president of the Federal Reserve Bank of San Francisco.
She’s been a strong Bernanke ally, backing near-zero short-term interest rates and the Fed’s bond-buying program to stimulate economic growth. For that reason, some Republican senators say they will likely oppose her. But she is widely expected to be confirmed.
Some insight and information now about Yellen, her views and her leadership style. It comes from Christina Romer, the former head of President Obama’s Council of Economic Advisers, and a friend of Yellen’s who advocated for her nomination. She’s an economics professor at the University of California, Berkeley. And Douglas Holtz-Eakin, a well-known conservative economist and former director of the Congressional Budget Office, he’s now president of the American Action Forum, a policy think tank.
We welcome you both to the program.
DOUGLAS HOLTZ-EAKIN, former Congressional budget office director: Thank you.
JUDY WOODRUFF: Christina Romer, you first.
You know Janet Yellen well. What qualifications does she bring to this job?
CHRISTINA ROMER, former Chairwoman Council of Economic Advisers: Oh, she brings so many.
Obviously, she’s as smart as they come, so that’s incredibly valuable. She’s a good economist. She also has incredibly good judgment. I think that’s one of the things that I admire the most, that she looks at the data, she looks at where we are, and she makes her decisions on the facts in front of her.
And then I think I guess the final one I would mention is collegiality. The Federal Reserve policy-making committee is not one that the Fed chair just dictates to. You have to bring a group along. You have to reach a consensus. And I think she will be very good at that. She really listens to people. She is a very persuasive arguer. She, I think, will help them to get to some very good decisions.
JUDY WOODRUFF: Christina Romer, the president also said, she is tough. We heard that Brooklyn accent. How tough is she?
CHRISTINA ROMER: You know, she really is.
The first word that anyone will say to describe Janet is nice, because she is truly a nice person. People tell stories of when she was president of the Federal Reserve Bank of San Francisco, she would eat lunch in the cafeteria, not in the executive dining room, because she liked to be with the staff.
She is a down-to-earth, nice person. But, boy, when there is a tough call to make, I have seen her absolutely make those calls. I think that will serve her very well. You can’t be all sweetness and light. You’re going to have to be tough, but you can be tough in a way that people feel, OK, I have been listened to. Now I’m going to get in line or whatever, or she has argued me down. So, she definitely has that tough streak.
JUDY WOODRUFF: I would like to have heard that discussion.
Douglas Eakin, you were telling us earlier, it’s not, though, a question of her qualifications.
DOUGLAS HOLTZ-EAKIN: No.
JUDY WOODRUFF: You were saying it is really about her view of the role of the Federal Reserve. How do you see that view?
DOUGLAS HOLTZ-EAKIN: Yes, I think that when she gets to the Senate for confirmation, people are not going to be concerned about her professional qualifications, her personal attributes.
They’re superb. They’re going to ask questions about her policy views and the future policies at the Federal Reserve. How does she think about inflation vs. unemployment? She has a reputation as a dove, not caring much about inflation. Many conservatives are deeply concerned about future inflation. There is none right now. So, tell us, please, Ms. Yellen, about this.
And that will be one line of reasoning. And it leads to a deeper concern that the Federal Reserve is doing the wrong thing now, because it’s not at all concerned about future inflation. It’s only worried about growth. It’s not generating growth, and we will get future inflation, so it will be zero for two.
JUDY WOODRUFF: You mean stimulating the economy policy?
DOUGLAS HOLTZ-EAKIN: Right.
JUDY WOODRUFF: She did mention inflation today, but she also made a point, as we heard, of saying too many Americans still don’t have a job. What does that say to you about what she cares about?
DOUGLAS HOLTZ-EAKIN: I don’t think it’s a question of aspirations.
I mean, conservatives and folks who have a very different view will agree on the goal. The goal is to get full employment and low, stable inflation. The question is the route to that. And many conservatives would like to see a single mandate for the Fed. Worry only about inflation, because over the long term, that gives you both control over inflation, but also better overall growth.
And you get the jobs you want as a result. So, it’s a question of tactics. And there’s a concern about the fact that the Federal Reserve has done some unprecedented things that unwinding all this bond buying and selling off those bonds and raising interest rates, they will harm growth more than this has helped and they will get inflation to boot.
JUDY WOODRUFF: Christina Romer, how do you see Janet Yellen’s views when it comes to inflation, when it comes to stimulating the economy and job creation?
CHRISTINA ROMER: Oh, I couldn’t disagree more with Doug here.
I think she absolutely believes completely in the Fed’s dual mandate, which is what in the Federal Reserve Act, that you’re supposed to care both about inflation and real growth. And I can tell you from both what I know of her and from her policy record that she cares deeply about inflation.
And if inflation were a problem, she would absolutely fight it. And when it and if it becomes a problem, she will be first in line to fight it. But this goes to what I was saying before about judgment, right? Where we are today is, we know unemployment is much higher than anyone thinks is normal or healthy for the economy, and inflation is in fact below the Fed’s target and, if anything, has been falling in recent years.
So, all those people that have been worried about inflation, they have been worried about inflation and the Fed’s unusual monetary actions since 2010, and inflation hasn’t — hasn’t resulted. And I think Janet has made the right call there. She said in this situation, the right thing is expansion.
But I have no — no doubt that, if the tables were turned or if inflation becomes a problem, she will absolutely use that toughness we talked about to fight it.
JUDY WOODRUFF: If that’s her record, then why the concern?
DOUGLAS HOLTZ-EAKIN: I think the concern is about the ability to execute the policy she clearly believes in successfully.
The Fed’s in unprecedented waters. It had promised that it would use — quote — “forward guidance,” telling people what they were up to, to make this a nice smooth transition. In September, they surprised everybody. We got financial markets bouncing around, people worried about growth.
So, well, that wasn’t a really good dry run. What about when they actually do start selling these bonds? Can they do a smooth exit from this policy, not interrupt the recovery, and can they do it without creating inflation? No one disagrees that that’s what they want to do. But there’s a lot of question about whether this is the right way to go about doing it.
JUDY WOODRUFF: Christine Romer, she’s also — I want you to comment on that, but she’s also, Janet Yellen, spoken about communicating, the Fed and how it communicates what it’s doing. How do you see her views in that regard?
CHRISTINA ROMER: On the Berkeley campus, she has a reputation for being an extraordinary teacher.
And I think that’s going to be a feature that serves her very well going forward, because, absolutely, the Federal Reserve chair’s job, a part of that is communicating. And it’s particularly important when you have sort of used your main tool, the interest rate, and pushed that all the way down as low as you can go.
A big part of how you can still have an effect on the economy is to communicate effectively and consistently. And I think she will do a very good job on that. On this issue of unwinding, nobody wanted to take all of these extraordinary actions. The reason the Fed is in the position that it has been in is that we had a terrible financial crisis. The economy went into a terrible recession.
We have had a slow recovery, and they have been on the front line of trying to fight that. And that was nobody’s — you know, nobody would have chosen that job, but they have stepped up and have been I think valiant in trying to think about things that they can do to strengthen the recovery.
I agree dialing it back will be hard when the time is right. I think Janet has the right judgment for knowing when the time is right. But I also think she will be perfectly tough and she will communicate clearly to markets and say, all right, now is when we’re unwinding, here is how it’s going to do. And I think she will do that effectively.
JUDY WOODRUFF: Quick comment on that, and then I have another…
DOUGLAS HOLTZ-EAKIN: And, again, this is the policy dispute.
Were the last couple of steps that the Fed took were really worth it? My judgment would have been, no, not do that. That’s a judgment. They made a judgment in the other direction. I think they have proven that they can push investors into different assets, stock market or whatever. But they haven’t proven that that generates real growth.
I wouldn’t have done the last round of asset purchase. They did. And so what you’re going to hear conservatives saying is, well, you did this thing that is now hard to get out of, and we didn’t get anything for it. Why? And that’s a policy dispute. It’s not about the intent.Â
JUDY WOODRUFF: We will be watching closely those confirmation hearings.
DOUGLAS HOLTZ-EAKIN: Thank you.
JUDY WOODRUFF: Douglas Holtz-Eakin, Christina Romer, we thank you both.
CHRISTINA ROMER: Sure. Thank you.