Speaking of the (Fed) devil, it was six short hours ago that we asked:
Shouldn't Obama have nominated Yellen by now
— zerohedge (@zerohedge) October 8, 2013 [21]
The answer has just presented itself and all the histrionics over the next Fed chairman, pardon chairwoman, choice are over. WSJ reports that Obama is set to announce Mr., pardon [22] Mrs Janet Yellen as Bernanke's replacement tomorrow at 3 pm at the White House. "The nomination would conclude a long and unusually public debate about Mr. Obama's choice which started last June when he said that Ben Bernanke wouldn't be staying in the post after his term ends in January. Mr. Obama gave serious consideration to his former economic adviser, Lawrence Summers, who pulled out in September after facing resistance from Democrats in the Senate."
[23]
However, while a Yellen announcement, fully priced in, in a normal environment would still have been good for at least a 10-20 S&P point bounce, with the debt ceiling showdown the far more immediate concern, the choice of the Chairwoman may not be the buying catalyst that it would have otherwise been.
From the WSJ [24]:
The announcement comes in the middle of a building political crisis in Washington which complicates the backdrop for Senate confirmation hearings. The federal government has been partially shut since Oct. 1, after its spending authority expired. The U.S. Treasury estimates that by Oct. 17 it will be low on cash because a federal debt ceiling prevents it from borrowing more money.
Ms. Yellen's nomination would be subject to Senate confirmation amid angry squabbling between Democrats and Republicans over fiscal issues. The timetable for hearings and a vote is uncertain.
Ms. Yellen has been the Fed's second-in-command since 2010. From that perch, she's been a close adviser to Mr. Bernanke as he devised new easy money programs aimed at supporting economic growth.
Her nomination would mean the Fed is unlikely to make any unusual lurches in its interest-rate decisions in the near-term. But she would have a number of vexing challenges almost immediately.
Just in case there is still any confusion about Yellen's ability to peer into the future, we once again present her own words confirming [25]otherwise. From the NYT which captured a moment of a 2010 FCIC hearing [26]:
Ms. Yellen told the Financial Crisis Inquiry Commission in 2010 that she and other San Francisco Fed officials pressed Washington for new guidance, sharing the problems they were seeing. But Ms. Yellen did not raise those concerns publicly, and she said that she had not explored the San Francisco Fed’s ability to act unilaterally, taking the view that it had to do what Washington said.
“For my own part,” Ms. Yellen said, “I did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system, the S.I.V.’s — I didn’t see any of that coming until it happened.” Her startled interviewers noted that almost none of the officials who testified had offered a similar acknowledgment of an almost universal failure.
And just like getting the president it richly deserves, the US is about to have a Fed chairman who will continue doing much more of the same: pillaging the middle class, and injecting trillions in "wealth effects" straight into the offshore bank accounts of the uberwealthy, while pushing the S&P to fresh all time record highs.
Finally, via Reuters, five facts, for those interested, about the new Fed chairman:
Following are five key facts about Yellen [27]:
- If confirmed by the Senate, Yellen, 67, would be first woman to head the U.S. Federal Reserve, and the second woman to lead a central bank for a developed nation. The first was Elvira Nabiullina, who was appointed to lead Russia's central bank in June.
- She is seen as a dove on monetary policy, favoring strategies that bring down unemployment even at the risk of driving inflation higher. She has said she does not believe there is often conflict between the two Fed goals. "When the goals conflict and it comes to calling for tough trade-offs, to me, a wise and humane policy is occasionally to let inflation rise even when inflation is running above target," she said in 1995.
- She has extensive policymaking experience. Before her appointment as Fed vice chair in 2010, Yellen took part in U.S. monetary policymaking as president of the San Francisco Federal Reserve Bank from 2004-2010, and as a governor on the Fed board from 1994 to 1997. She also chaired President Bill Clinton's Council of Economic Advisors from 1997 to 1999.
- Yellen is a sharp and respected economist. With a PhD from Yale, she has taught economics at University of California, Berkeley, Harvard University and the London School of Economics, and she has published research on topics as disparate as youth gangs, single mothers, optimal monetary policy, wage and price rigidity, and trade.
- Economics saturates her personal life as well. She is married to, and has co-authored a number of papers with, Nobel Prize-winning economist George Akerlof, whom she met in the fall of 1977 when they were both economists at the Fed board. They married the following June and left the Fed to teach at the London School of Economics. Their only child, now a university economics professor, knew he wanted to go into economics by the time he was 13.