Janet Yellen Takes Big Step Toward Taking Reins At The Federal Reserve Thomas Ferraro reuters.com December 20, 2013
Janet Yellen, an unwavering advocate of the Federal Reserve's aggressive steps to boost the U.S. economy, on Friday took a big step toward becoming the first woman to chair the central bank as her nomination cleared a Senate procedural hurdle. The Senate voted 59-34 to move forward with the nomination, indicating ample support for her confirmation. A final vote is set for January 6 when the Senate returns after a holiday break. If approved, as widely expected, the Fed's current vice chair would succeed Ben Bernanke, whose second four-year term as chairman expires on January 31. Yellen's main task would likely be unwinding the extraordinary stimulus the Fed has put in place during Bernanke's watch. In the test vote, she won unanimous support from Democrats, but all but five Republicans on hand voted against taking up the nomination - a sign of both unease with the central bank's unconventional policies and anger at a recent Senate rule change that made it easier for majority Democrats to end filibusters. It was the Senate's fi nal roll call vote of the year. Yellen, 67, has been a strong supporter of the unprecedented and controversial monetary policies that Bernanke championed to spur investment, hiring and economic growth. The central bank cut overnight interest rates to near zero in late-2008 and has quadrupled its balance sheet to about $4 trillion through a series of massive bond purchase programs meant to push down
longer-term borrowing costs. A strong believer that monetary policy can help get more Americans back to work, Yellen told a Senate hearing last month that efforts to boost hiring were an "imperative" for the central bank. Yet with the unemployment rate having fallen to a five-year low of 7 percent last month, her main task is likely to be unwinding the extraordinary stimulus the Fed put in place to heal the scars from the deep 2007-2009 recession. The central bank gave her a road map of sorts on Wednesday with a decision to trim its monthly bond purchases by $10 billion in January, dropping them to $75 billion. Bernanke said it would likely end the asset purchases by late 2014, and that Yellen fully supported the decision to start winding them down. Many Republicans - and some Fed officials - have worried the quantitative easing program, known as QE3 because it is the Fed's third such effort, could stoke inflation or asset-price bubbles. The trick for Yellen will b e ending the purchases without rattling financial markets or disrupting a U.S. economic recovery that has proven quite vulnerable to shocks both domestic and foreign in the past few years. To soothe investors, the Fed accompanied its plan to reduce its bond buying with a strengthened pledge to keep benchmark overnight interest rates low for a long time to come, a policy that analysts see in keeping with Yellen's stated commitment to foster a stronger jobs recovery. Eric Stein, portfolio manager at Eaton Vance in Boston, said Yellen would be very focused on making sure policymakers at the central bank stayed on message. "I think under her, they will continue to signal dovish policy, especially with inflation so low," he said. "I think she'll take it slow." GUIDING HAND Yellen would bring to the job a wealth of experience at the top ranks of economic policy-making. She ran the San Francisco Federal Reserve Bank for more than five years before becoming the central bank's vice chair in 2010. She had previously served on the Fed's board in the 1990s and as a top economic adviser to President Bill Clinton. "She really isn't a new hand at all," said Carl Tannenbaum, chief economist at Chicago's Northern Trust. "She certainly will not need to be oriented to what's going on over there, and so I expect a very smooth transition."
A highly acclaimed economist, Yellen has taught at the London School of Economics, Harvard and the University of California, Berkeley, and has written on a diverse range of topics from single mothers and youth gangs to wage inflation. As the Fed's No. 2, she has played a lead role in refining the central bank's communications strategy, spearheading its adoption nearly two years ago of a 2 percent inflation target. She is a proponent of the forward guidance the Fed has used to shape market expectations about the path of interest rates. The central bank has said since December of last year that it would hold rates near zero at least until unemployment falls to 6.5 percent, as long as inflation stays in check. On Wednesday, it said it expected to hold steady "well past" the time the jobless rate threshold is reached. CHANGING FACE OF THE FED Yellen's confirmation would fill one big hole at the Fed, but leave several others. Governor Elizabeth Duke stepped down from the seven-member Fed board in August; Sarah Bloom Raskin is expected to leave soon for the No. 2 job at the U.S. Treasury; and Bernanke, 60, is widely expected to step down from his board seat when his separate term as chairman expires. Last week, a source told Reuters the White House had asked Stanley Fischer, 70, to replace Yellen as vice chair. The former head of the Bank of Israel is seen as one of the world's top monetary economists. Yellen, who has long argued that the Fed should tolerate slightly higher inflation if that is the cost of fighting high unemployment, has never dissented on a Fed policy decision. But she also has not shied away from advocating rate increases when she felt the situation called for it.
Treasure Secretary Jack Lew Warns Congress
Of February Debt Ceiling Deadline Reuters December 20, 2013 The Obama administration warned Congress on Thursday the government could run out of borrowing room to help pay its bills as soon as February if lawmakers do not move swiftly to raise the nation's debt ceiling. "I respectfully urge Congress to take action to raise the debt limit at the earliest possible moment," Treasury Secretary Jack Lew said in a letter to congressional leaders. Congress passed a two-year budget deal on Wednesday to trim some spending cuts planned for next year, and the pact reduces the risk of a government shutdown early next year. (Read more: Budget crisis) But the legislation does nothing to directly address the potential financial crisis that looms if Washington does not raise the debt ceiling soon. In October, Congress and the administration suspended a $16.7 trillion cap on borrowing until Feb. 7. A new, higher limit will then be set, incorporating borrowing done through that date. If lawmakers do not raise the limit further, Treasury will be able to juggle money between government accounts to keep just under the new limit for a few weeks. (Read more: CNBC explains the debt ceiling) But Lew said the Treasury would exhaust these so-called extraordinary measures sometime between late February and early March. After then, it would no longer be able to borrow more to cover its expenses. "While this forecast is subject to inherent variability, we do not foresee any reasonable scenario in which the extraordinary measures would last for an extended period of time," Lew said. Once the money runs out, the government could start missing payments on its debt and other obligations, such as Social Security pensions. Many economists think a U.S. default could trigger a financial panic and perhaps even an economic depression. Treasure Secretary Jack Lew warns Congress of February debt ceiling deadline VIDEO BELOW http://www.infowars.com/lew-warns-congress-of-february-debt-ceiling-deadline/ Truth in Media: 100 Years of the Federal Reserve VIDEO BELOW http://www.youtube.com/watch?v=Fdfq-sDgFU8 Lear Capital CEO: The Fed Is A Bubble Making Machine VIDEO BELOW http://www.youtube.com/watch?v=Yrd8M0uUI2A
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