Barack Obama’s choice for chairman of the Federal Reserve, Janet Yellen, pledged to help those hardest hit by the recession and safeguard the financial system, at the official announcement of her nomination on Wednesday.
At a White House press conference, Obama praised current Fed chairman Ben Bernanke for leading the US through “some of the most daunting circumstances of as lifetime. He has truly been a stabilizing force –not only for our country, but for the entire world,” Obama said.
Obama described Yellen’s nomination as “one of the most important economic decisions that I’ll make as president.”
He said Yellen was one of the world’s leading economists and had a proven track record at the Fed, where she is currently vice-chair: “She’s a proven leader and she’s tough – not just because she comes from Brooklyn.”
Obama said she had sounded the alarm bell early about the housing market bubble and excesses in the financial markets before the recession. “She calls it like she sees it,” said Obama.
Yellen said she was “honored and humbled” by the appointment. If she is approved by the Senate, Yellen will be the first woman to head the Fed in its 100-year history.
“The past six years have been tumultuous,” she said. “While I think we will agree that more needs to be done to help those hardest hit by the recession, we have made progress,” she said. However, she added that “many Americans still can’t find a job and worry that they can’t pay their bills.”
Yellen also highlighted the Fed’s regulatory role. “We can and must safeguard the financial system,” she said.
The announcement came as minutes from the Federal Reserve's September policy meeting were released showing increased tension about the Fed’s $85bn a month economic stimulus programme, known as quantitative easing (QE).
The Fed surprised economists last month when it decided to continue its stimulus at current levels. Bernanke had previously signalled that the Fed could start “tapering” the size of the bond-buying scheme by the end of the year.
But the Fed’s members were concerned about the economy, with a row over the debt ceiling and the federal budget on the horizon. “Questions were raised about the effects on the housing sector, and on the broader economy of the tightening in financial conditions in recent months, as well as about the considerable risks surrounding fiscal policy,” according to the minutes.
“The announcement of a reduction in asset purchases at this meeting might trigger an additional, unwarranted tightening of financial conditions, perhaps because markets would read such an announcement as signalling the committee’s willingness, notwithstanding mixed recent data, to take an initial step toward exit from its highly accommodative policy,” the minutes said.
As a result, “ a number of participants” thought a cautious approach was needed and “it would be prudent to await further evidence of progress before reducing the pace of asset purchases.”
The decision to keep buying at the same rate “was a relatively close call”, according to the minutes.
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