Would Janet Yellin as Fed Chair Mark a Shift in Economic Policy?
Bill Black: Yellin’s confirmation marks a victory for progressive democrats?
JAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I’m Jaisal Noor in Baltimore. And welcome to this latest edition of The Black Financial and Fraud Report.
President Obama has officially nominated Janet Yellen as the chair of the Federal Reserve. If confirmed, 67-year-old Yellen will be the first woman to head a major central bank. She has served as the Fed’s vice chairman since 2010 and is a proponent of strong policies to reduce unemployment rather than obsessive focus on inflation.
Now joining us to discuss this is Bill Black. He’s an associate professor of economics and law at the University of Missouri-Kansas City. He’s a white-collar criminologist, former financial regulator, author of The Best Way to Rob a Bank Is to Own One, and, of course, a regular contributor to The Real News.
Thank you so much for joining us, Bill.
BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.
NOOR: So, Bill, what is the significance of President Obama nominating Janet Yellen and not nominating Larry Summers?
BLACK: The significance is that it demonstrates that progressive Democrats actually can succeed, because but for the unusually strong opposition of progressive Senate Democrats, who indicated that they would not vote in support of a nomination of Larry Summers, Larry Summers pretty clearly would have been President Obama’s choice, and it’s likely that the Republicans would have approved Summers as well. So you’re seeing the virtue of progressives actually digging in their heels and saying, no, we’re not going to say yes to the people that created the policies that drove the crisis.
NOOR: Now, what is the significance–can you talk more about the significance of Yellen being nominated? And does this mark a significant shift in policy from her predecessors?
BLACK: Yes. I mean, the news stories, being the way they are, emphasize gender, but the clear thing is that but for her gender, there would have been no question but that Yellen would have been the first choice, because she has the absolute superb background in addition to this being her second stint on the Federal Reserve. As you said, she is currently the vice chairman and the number-two person. She has also been the chairman of the President’s Council of Economic Advisers, and she’s been the president of the Federal Reserve Bank of San Francisco. So she’s run a regional Fed and she’s considered one of the top economists in the country.
Indeed, The Wall Street Journal has paid her two unintentional compliments. One, they did a study on which of the Fed members’ prognostications, in other words predictions, proved to be most accurate, and they found the answer was Janet Yellen’s. And second, there is an op-ed in The Wall Street Journal denouncing her appointment as dangerous because she cares about unemployment. And the tagline at the end of their video is, wow, that’s frightening. So, it apparently really does frighten the hard right that there might be someone that would take seriously the legal mandate that the Federal Reserve has to seek full employment.
So the real change here is that this will be the first Democratic appointee–assuming she’s approved–in over 25 years. People tend to forget that President Obama reappointed Ben Bernanke, a fairly partisan Republican, to the position as chair of the Federal Reserve after he had been a complete disaster as a regulator and refused, despite clear legal authority, to stop all liars’ loans. He refused to use that authority, and finally only did so under pressure from Congress in 2008 after liars’ loans had already disappeared. And even then he delayed the effective date of the rule for 15 months, because you wouldn’t want to inconvenience a fraudulent lender.
So this is an incredible change of over a quarter century of complete Republican dominance of the Federal Reserve. Finally a president, a Democratic president, is actually going to put a Democrat in charge. And remember, Clinton before reappointed Alan Greenspan, who of course was even more insane than Bernanke about how fraud didn’t exist and was with the Rubinites–that includes, of course, Larry Summers, the leading architect of the deregulation that brought us this crisis.
NOOR: And, Bill, the likelihood that she will get confirmed in the Senate?
BLACK: Well, not my area of expertise to guess about Congress, but the media believes that there is a very good chance that she will be confirmed. She is superb. She was by far the most qualified candidate for the job. As I said, but for the fact that she’s a woman, she clearly would have been Obama’s first choice. And the Republicans would, if they attacked her, probably make clear the sexist nature of their challenge, because they don’t have much good to say on substance.
She is, by the way, also (talk about power couples) the spouse of George Ackerlof. And listeners will probably remember George Akerlof with Paul Romer as the author of the famous paper “Looting: The Economic Underworld of Bankruptcy for Profit”. So these are the economic scholars who have warned the most that deregulation is exceptionally criminogenic and that the big danger is the CEO looting the bank.
So one of the hopes is that Janet Yellen would also be the first head of the Federal Reserve to actually take regulation seriously. And if she does, well, from her own expertise and from her spouse, she has, you know, the superb basis in economics and criminology and past regulatory successes for figuring out how to make the Fed, for the very first time in its history, an effective financial regulator.
NOOR: Thank you so much for joining us, Bill.
BLACK: Thank you.
NOOR: Thank you for joining us on The Real News Network.
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