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Obama to formally nominate Yellen as Federal Reserve chief

Update: October, 09/2013 - 11:34

WASHINGTON – President Barack Obama will nominate Janet Yellen on Wednesday as the first female head of the US Federal Reserve, at a time when raging political turbulence is imperiling the fragile US economy.

Obama will put forward Yellen for a four-year term at a White House event at 1900 GMT also attended by outgoing Fed Chairman Ben Bernanke, a US official said on Tuesday.

Yellen, currently a vice chair of the US central bank, emerged as favorite for the post after another possible pick, former Treasury secretary Lawrence Summers, pulled out of the running due to opposition from Obama's Democratic allies in the Senate.

The 67-year-old sits in the middle of the Fed "doves" – those focused on stimulating the economy back to full employment and, not yet at least, worried about the specter of easy money sparking uncontrollable inflation.

But one of her first tasks as Fed chief, if confirmed by the Senate, will be to judge how quickly to taper off the monetary stimulus policies that the Fed had earlier appeared set to ease by the end of the year.

Economists and markets had widely expected the $85 billion a month quantitative easing program to be scaled back after September's Federal Reserve Open Market committee (FOMC) meeting.

But a worsening of some key economic indicators, as well as political battles over economic policy in Washington, had raised concerns.

Yellen has spent more than a dozen years altogether at the Fed in various positions, including the last four years as vice chair. She would be the central bank's first female chief.

She will begin to prepare for her confirmation hearings at a time of stark partisanship in Washington, with Obama and Republicans facing off over the need to lift the US debt ceiling and a government shutdown.

Summers, who served as a key White House economic advisor in the crisis-marred initial few years of Obama's first term, had run into trouble over his record on policy while a member of the Clinton administration in the 1990s and for a supposedly abrasive personality.

In particular, three Democratic senators on the Senate Banking Committee, the first stop for congressional approval, raised questions about Summers having driven the banking deregulation that led directly to the financial crisis, and about his alleged closeness to Wall Street.

Yellen, by contrast, won the backing of around 500 economists, who signed a petition stating that she was one of the first members of the FOMC to realize the financial sector's difficulties in 2007 could cause a major recession.

She is not expected to face serious opposition from Democrats in the Senate, but could face some tough questions on the monetary easing program from Republican senators.

Senator Tim Johnson, Democratic chairman of the Senate Banking committee, said Yellen had a "depth of experience that is second to none" and would be an excellent Federal Reserve Chairman Democratic Senator Chuck Schumer said Yellen would be "an excellent choice and I believe she'll be confirmed by a wide margin."

Bernanke, has led the Fed since 2006, through one of the most turbulent economic periods in US history. He was originally chosen by Republican president George W. Bush.

Obama kept him on for a second term in 2010 as the country was still reeling from the deepest economic crisis since the 1930s – one of Bernanke's academic specialties.

New York-born Yellen is married to economics Nobel prize winner George Akerlof and is the mother of economics professor Robert Akerlof. She studied economics at Brown University and then Yale, where she earned a doctorate.

She has been a professor at Harvard and, more recently, at the University of California, Berkeley, where her husband also teaches and conducts research.

She has been close to the Democratic party power center at least since the 1990s. Then-president Bill Clinton tapped Yellen for the Fed board in 1994 and named her to his Council of Economic Advisers from 1997-1999. AFP

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