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article imageWomen In Banking: Janet Yellen Continuing The Trend

By Daniel Taibleson     Jan 29, 2014 in Politics
Christine Lagarde became the first woman to head the International Monetary Fund in 2011, while Karnit Flug was named the first female governor of the Bank of Israel this past October. Now Janet Yellen will bring a woman's touch to another central bank.
The Senate confirmed Yellen on January 6 as Chairwoman of the Federal Reserve. President Barack Obama called her a proven leader who is highly qualified for what he termed one of the most important nominations a president can make.
Most analysts believe the course and policies of the Fed will be very similar under Yellen as they were under predecessor Ben Bernanke. But Yellen will add her personal touch to what is sure to be an interesting inaugural year.
When Doves Cry
Yellen has consistently voted for and advocated dove-like policies throughout her 12-year off-and-on career at the Fed. Like Bernanke, Yellen believes keeping interest rates artificially low, along with loose monetary policies, are the best approaches to shrink unemployment and stimulate economic growth. The biggest differences between the two may be Yellen's intuition and perceived altruism.
She jousted with then-New York Fed Markets Group VP and current governor William Dudley in December of 2007 over housing sector forecasts. Dudley believed foreclosures and prices were contained, while Yellen, according to the FOMC transcripts, anticipated further fall-out. But Yellen admitted two years later that even she did not "appreciate" the risks involved in the Fed's policies at the time and could not have anticipated the complete collapse of not only housing, but the US economy in general.
QE Tapering
The Federal Open Market Committee announced in December that it will begin tapering quantitative easing (assert purchases) by $10 billion per month starting in January. Mohammed El-Erian, CEO of Pimco, called this new policy a gift bequeathed to Yellen by Bernanke to set her up for a successful year one. But he also cautioned that successful QE tapering will depend on other macro-economic policies, specifically the reality of rising mortgage rates and realistic inflation expectations by the Fed.
Ryan Sweet of Moody's Analytics, an industry leader in financial modeling and bank stress testing, said via the Wall Street Journal that inflation is still lagging behind the Fed's target of two percent. That was before the Fed announced its tapering initiatives. The CPI sat at 1.5 percent in December, according to the Bureau of Labor Statistics. Yellen has stated throughout her career that she is committed to low inflation rates and low unemployment. Thus on the surface, tapering of QE3 is right up Yellen's alley. But it remains to be seen how other policies and initiatives influence these numbers.
Woman's Touch
The one thing Yellen brings to the table that Bernanke, Alan Greenspan or Paul Volcker did not is a bit of humanity. She not only thanked both her husband and son for their support during her nomination speech, but stated a Federal Reserve mandate to "serve all the American people." Yellen went further, saying the Fed's success depends solely on the integrity of her staff.
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Photo by Global X via Flickr
Yellen's first day in office as Chairwoman is February 1.
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