In making his announcement, Obama praised Bernanke for his "strong leadership" and "wisdom" in guiding the Fed in rough times over the past eight years. He called Yellen "exceptionally well-qualified for this role" and "renowned for her good judgment." She "knows how to build consensus." America's workers and their families will have a "champion" in her.
The 67-year-old Yellen is professor emeritus of business and economics at the University of California, Berkeley, where she has been on the faculty for 33 years. For two years, she was an economist with the Fed, and for six years was president and CEO of the Twelfth District Federal Reserve Bank of San Francisco. She served on President Clinton’s Council of Economic Advisers. She has economics degrees from Brown and Yale universities and has written widely on macroeconomics with a focus on the implications of unemployment.
Her nomination culminates a conflict between the White House and liberals in the Senate and in the grassroots over who would chair the central bank. When, starting in May, report after report pointed to the abrasive, arrogant, sexist, deregulation-happy, my-way-or-the-highway Larry Summers as the president's favored choice for the post, opposition swiftly grew.
Twenty senators wrote a letter to Obama urging him to nominate Yellen, and various progressive organizations, including Daily Kos, joined in a petition drive urging the president not to appoint Summers. Not all Summers' foes endorsed Yellen.
The president, reportedly angered by much of the criticism of Summers, offered a vigorous defense of him in July. But when it became clear that his chances of being confirmed were slim at best, Summers withdrew his nomination. Shortly thereafter, Obama urged Democratic senators to unite behind Yellen.
She can expect some tough questioning at her confirmation hearings in the Senate. That's partly a function of Republican desires to mess with anything President Obama tries to do and partly GOP disaffection with Federal Reserve policy in general. There will be calls for a deep audit of the Fed, first pushed by libertarian-when-it-suits-him Sen. Rand Paul of Kentucky, but now the general Republican perspective. That's "audit" in the loosest meaning of the word. More like a fishing expedition and general attack, which a few on the left also support.
Patrick Reis at the National Journal expects she will be confirmed but the "path will neither be quick nor painless." You can read more analysis of the nomination below the fold.
On the left, some have argued that Yellen is just a polite version of Summers in terms of policy. Certainly, she is an establishment figure, no advocate of leftist Modern Monetary Theory. If she were, she'd have no chance of confirmation no matter how valuable having an MMT-favoring chief at the helm of the Fed might be.
Left critics offered other choices as Fed chief: the combative Sheila Bair who used to head the FDIC; James Fisher, president of the Dallas Fed who believes in breaking up the big banks; Christina Romer, who headed Obama's Council of Economic Advisers but was hamstrung in her advice by Larry Summers, who served as gatekeeper for what ideas did and did not reach the president.
In terms of monetary policy, it's no doubt accurate that Yellen will be much like Bernanke has been and Summers would have been. She seems likely to continue the easy money policy that now has the Fed making $85 billion a month in bond purchases as long as the unemployment rate remains at a high level. Critics on the right see that policy as inflationary while some on the left see it as a gift to the banks because it keeps their borrowing costs low with profit made from lending at higher rates. But Yellen has made clear that she puts the Fed's focus on unemployment ahead of inflation.
Yellen has also been criticized on the left for favoring the 1990s repeal of the New Deal era Glass-Steagall Act that separated commercial from investment banking. She has, however, seemingly changed her mind on that score and favors stricter regulations. Under the Dodd-Frank Act, the Fed will develop new banking restrictions. As with her underestimate of the impact of the housing bubble, Yellen seems able to learn from her mistakes.
That alone is the reason that scarcely anyone on any side of the spectrum is lamenting the fact that Summers will not be in a position to screw things up again.