The Times West Virginian

Headline News

February 4, 2014

Yellen sworn as Fed chair, succeeding Bernanke

WASHINGTON — Janet Yellen officially took over the leadership of the Federal Reserve on Monday — and along with it a delicate task: Unwinding the Fed’s extraordinary economic stimulus without spooking investors or slowing a still-subpar economy.

Yellen, the first woman to lead the Fed in its 100 years, was sworn in during a brief ceremony in the central bank’s board room. She succeeded Ben Bernanke, who stepped down last week after eight momentous years.

Bernanke is joining the Brookings Institution, a Washington think tank, where he will be a distinguished fellow in residence, Brookings announced Monday.

The economy Yellen inherits is far stronger than the one Bernanke faced in the fall of 2008, when the worst financial crisis since the 1930s erupted. Bernanke spent the rest of his tenure launching and managing an array of programs that are widely credited with helping restore lending and strengthen the financial system and economy after the Great Recession.

Yellen, 67, who served as vice chair under Bernanke, is taking over just as the Fed has begun its first modest moves to scale back its enormous support for the economy. At a meeting last week, the last under Bernanke’s leadership, the Fed approved a second $10 billion reduction in its monthly bond purchases to $65 billion.

The first cut was announced at the Fed’s December meeting, when it said it would trim its purchases from $85 billion a month, the level for more than a year. The Fed’s bond buying has been intended to keep long-term interest rates near record lows to stimulate the economy.

But as the economy has improved, Fed officials have decided it could withstand less help. The Fed is expected to keep reducing its bond purchases this year and end them altogether in December.

If the Fed moves too quickly to withdraw its stimulus, it could spook financial markets and send rates higher. Conversely, paring its bond buying too slowly could risk creating bubbles — that might burst — in real estate, stocks or other assets.  

Already, concern about reduced Fed bond buying and the prospect of higher U.S. rates has shaken global markets. Central banks in several emerging nations have raised rates to try to prop up their falling currencies and control inflation. Stock prices have sunk.

Countries such as Turkey, India and Brazil had benefited from the Fed’s bond purchases. Investors poured money into these countries in search of higher yields than they could get in the United States and other developed nations.

Now, with U.S. rates possibly headed up, investor money is flowing back out of these countries.

Sung Won Sohn, an economics professor at California State University Channel Islands, said he wouldn’t be surprised if the Fed slowed or even halted its bond reductions if the turbulence overseas worsens.

“If the global market turmoil continues, I think the Fed will have to take notice,” Sohn said. “We are living in an interconnected world, and I don’t think the Fed can ignore what is happening overseas.”

The Fed’s next meeting, the first with Yellen in charge, is March 18-19. She is scheduled to hold a news conference afterward. Before then, Yellen will appear before Congress next week to deliver the Fed’s twice-a-year report on its handling of rates and its economic outlook.

House Financial Services Committee Chairman Jeb Hensarling, R-Texas, has been vocal in his criticism of the Fed’s policymaking. Hensarling has argued that the Fed’s use of trillions in bond purchases and ultra-low rates have left the country vulnerable to higher inflation and economic instability. He has announced hearings on the Fed’s bond buying and its “potential unintended consequences.”

Yellen has said that such fears are overblown and that the Fed has the means to monitor risks and address them.

A close ally of Bernanke, Yellen is expected to follow his approach of maintaining low short-term rates while gradually scaling back the bond purchases designed to keep long-term rates low.

Yellen made no comments during the ceremony Monday in which the oath of office was administered by Fed Governor Daniel Tarullo, the senior member of the Fed’s seven-member board.

She was sworn in before a fireplace in the Fed’s stately board room. Her husband, George Akerlof, a Nobel-winning economist, was present, as were Fed board members and staff.

Yellen’s four-year term as Fed chair will end on Feb. 3, 2018. But Fed chairs generally serve more than one term.

In the meantime, a blog posting from Brookings said Bernanke would work on a book about his years at the Fed. In the past, Bernanke has said he looked forward to writing and giving speeches once he stepped down.

 

1
Text Only
Headline News
  • Ukraine, Russia trade blame for shootout

    Within hours of an Easter morning shootout at a checkpoint manned by pro-Russia insurgents in eastern Ukraine, Russia’s Foreign Ministry issued a statement blaming militant Ukrainian nationalists and Russian state television stations aired pictures of supposed proof of their involvement in the attack that left at least three people dead.

    April 20, 2014

  • Governor: Closing Boston amid bomber hunt ‘tough’

    Several days after the Boston Marathon bombing, Gov. Deval Patrick received a call in the pre-dawn hours from a top aide telling him that police officers outside the city had just engaged in a ferocious gun battle with the two men suspected of setting the bombs and that one was dead and the other had fled.

    April 20, 2014

  • Everest avalanche reminder of risks Sherpas face

    The rescuers moved quickly, just minutes after the first block of ice tore loose from Mount Everest and started an avalanche that roared down the mountain, ripping through teams of guides hauling gear.
    But they couldn’t get there quickly enough.

    April 20, 2014

  • Colorado deaths stoke worries about pot edibles

    A college student eats more than the recommended dose of a marijuana-laced cookie and jumps to his death from a hotel balcony. A husband with no history of violence is accused of shooting his wife in the head, possibly after eating pot-infused candy.

    April 19, 2014

  • Everest avalanche kills at least 12

    An avalanche swept down a climbing route on Mount Everest early Friday, killing at least 12 Nepalese guides and leaving four missing in the deadliest disaster on the world’s highest peak. Several more were injured.

    April 19, 2014

  • Diplomacy doesn’t move insurgents in Ukraine

    Pro-Russian insurgents defiantly refused Friday to surrender their weapons or give up government buildings in eastern Ukraine, despite a diplomatic accord reached in Geneva and overtures from the government in Kiev.

    April 19, 2014

  • Clinton to Obama: Many parallels

    Thousands of pages of documents from President Bill Clinton’s White House affirm a longtime adage: The more things change, the more they stay the same.
    As Clinton prepared for an August 1994 news conference in which he hoped to build public support for his struggling — and ultimately unsuccessful — health care overhaul, he told his advisers: “A lot of them want to know they can keep their own plan if they like it.”

    April 19, 2014

  • Obama voices skepticism on Russia in Ukraine

    President Barack Obama conveyed skepticism Thursday about Russian promises to de-escalate a volatile situation in Ukraine, and said the United State and its allies are ready to impose fresh sanctions if Moscow doesn’t make good on its commitments.

    April 18, 2014

  • President defending health-care law good for some Democrats

    President Barack Obama’s full-throated defense of his health-care overhaul seems perfectly timed for Democrats who want their party to embrace the law more enthusiastically.
    At a White House news conference Thursday, Obama noted that health insurance enrollments under the new law are higher than expected, and costs are lower.

    April 18, 2014

  • Deal reached on calming Ukraine tensions — for now

    In a surprise accord, Ukraine and Russia agreed Thursday on tentative steps to halt violence and calm tensions along their shared border after more than a month of Cold War-style military posturing triggered by Moscow’s annexation of Crimea.

    April 18, 2014

House Ads
Featured Ads