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Fed nominee Yellen defends stimulus efforts before Senate committee

November 14, 2013 at 12:00 AM EDT
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GWEN IFILL: As Washington debated health care fixes and the world coped with the Philippine disaster, the woman who would become — who could become the most powerful banker in the world appeared on Capitol Hill today.

Janet Yellen, who would succeed Ben Bernanke as chairman of the Federal Reserve, appeared to move one step closer to confirmation, but not without scrutiny.

NewsHour congressional correspondent Kwame Holman reports.

MAN: I very much appreciate your candor and transparency.

SEN. JOE MANCHIN, D-W.V.: You see, the committee has the utmost respect for you.

KWAME HOLMAN: Janet Yellen, the Fed’s current vice-chair, got a warm welcome before the Senate Banking Committee, and she quickly turned to making the case that the economy still needs the Fed’s stimulus efforts.

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JANET YELLEN, Federal Reserve Chair nominee: The Federal Reserve is using its monetary policy tools to promote a more robust recovery. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.

KWAME HOLMAN: Since late 2008, the Fed’s been buying mortgage-backed securities and Treasury bonds, now at a rate of $85 billion a month. The goal is to keep interest rates low and encourage growth. Some Republicans worry it’s all gone too far and that the massive bond-buying has inflated stock prices and real estate values.

Alabama’s Richard Shelby cited the record size of the Fed’s holdings, now $3.8 trillion, or almost a quarter the size of the nation’s total economic output.

SEN. RICHARD SHELBY, R-Ala.: Looking back in history, recent history, the last 30, 40, 50 years, have you noticed any portfolio of the Fed approaching what it is today?

JANET YELLEN: Not of the Federal Reserve.

RICHARD SHELBY: That’s what I mean.

JANET YELLEN: But other central banks…

RICHARD SHELBY: I’m asking you about the Federal Reserve of the United States of America.

JANET YELLEN: No, I have not, Senator.

RICHARD SHELBY: OK.

KWAME HOLMAN: Others warned that while investors are benefiting greatly from low interest rates, retirees who depend on interest payments are hurting.

Republican Mike Johanns of Nebraska:

SEN. MIKE JOHANNS, R-Neb.: I think the economy has gotten used to the sugar you have put out there, and I just worry that we’re on a sugar-high. And that is a very dangerous thing for the little person out there who’s just trying to pay the bills and maybe put a buck away for retirement.

JANET YELLEN: If we want to get back to business as usual and a normal monetary policy and normal interest rates, I would say we need to do that by getting the economy back to normal. And that’s what this policy, I hope, will succeed in doing.

KWAME HOLMAN: Yellen gave no indication of when the Fed might scale back on its bond buying, known as quantitative easing.

On the Democratic side, Elizabeth Warren of Massachusetts complained the Fed still isn’t doing enough to limit the size and dominance of big banks.

SEN. ELIZABETH WARREN, D-Mass.: The truth is, if the regulators had done their jobs and reined in the banks, we wouldn’t need to be talking about quantitative easing because we could have avoided the 2008 crisis altogether.

KWAME HOLMAN: Yellen agreed with the need to increase monitoring of the financial system. She also noted that the government shutdown and debt ceiling brinksmanship have hindered efforts to boost the economy.

MAN: This hearing is adjourned.

KWAME HOLMAN: Looking ahead, Yellen pledged to continue the push by outgoing Fed Chairman Ben Bernanke for greater transparency in what the Fed is doing and how.