When Janet Yellen stood at the lectern in the State Dining Room of the White House on Wednesday, she offered a reassuring contrast. President Obama nominated Yellen to lead the Federal Reserve Board, replacing Ben Bernanke, who will step down at the end of January. Against the backdrop of a Washington in turmoil, afflicted by a phony crisis launched by House Republicans, the federal government closed, the country approaching its debt-ceiling, she represents what has been missing — steadiness, clarity, practicality and an eye on serving the whole.
For a long time, the choice of a successor for Bernanke was framed as Yellen vs. Lawrence Summers, a former Treasury secretary and Obama adviser. Summers wouldn’t have been a good choice, as U.S. Sen. Sherrod Brown and Democratic colleagues rightly argued. Summers lacks a sufficiently collegial temperament, his nomination almost certain to stir a noisy political fuss.
It matters that Yellen would be the first woman to serve in the position, clearing a barrier in a profession dominated by men. Yet these elements hardly tell the full story. What matters most is that Yellen rates as the most qualified, her career track rich in experience and insightful research as an economist. An effective policymaker in the Clinton White House, she has been at the Federal Reserve for the past 15 years, as president of the San Francisco bank and currently as vice chairman.
On top of all that, Yellen has been right in her judgment, issuing early warnings about the housing and financial bubbles, recognizing the need for the central bank to put stimulus first, in view of the sour job market and the diminished presence of inflation. Unfortunately, the Fed largely has acted on its own, Congress practicing a policy of austerity that has slowed the recovery.
The test facing the Fed now is how and when to roll back its expansionary approach. The past year, it has hinted at carefully stepping off the gas, yet then, correctly, held to the policy, unemployment still stubbornly high, the recovery fragile. Soon enough, it must proceed to navigate the tricky course, seeking the necessary balance, as it returns to a more traditional approach.
For this task, Yellen would be well placed, her style deliberate, pragmatic, driven by information and alert to the two roles of the Fed, pursuing full employment and fighting inflation. More, she understands the principle of no surprises. She grasps that the Fed must communicate clearly, operate more transparently and seek to minimize uncertainty about its next move. That usually is easier to pledge than to achieve. Yet it is the direction the central bank should take, to the benefit of Wall Street and Main Street.
If Ben Bernanke ably guided the economy out of the wreckage, Janet Yellen can build from there. First, she deserves rapid Senate confirmation.