WASHINGTON — The Senate on Monday confirmed Janet Yellen to be the next leader of the Federal Reserve Board, making her the world's most powerful central banker.
Yellen, the current vice chair at the U.S. central bank, stands to become the first woman to lead the Fed in its 100-year history. It will now fall to her to be responsible for guiding the agency forward as it gradually unwinds its monthly $75 billion bond-buying program and overseeing the finalization of critical bank regulatory laws called for by the Dodd-Frank Act.
Yellen, previously the president of the San Francisco Fed and a member of the Council of Economic Advisors in the Clinton Administration, will assume a four-year term as chairman on Feb. 1. President Obama first nominated her in the fall to succeed outgoing Fed Chairman Ben Bernanke, whose term expires at the end of January. She is the first Democrat to hold the job since 1987 when Paul Volcker was chairman.
Following the vote, the National Association of Federal Credit Unions issued a statement congratulating Yellen.
President and CEO Dan Berger said NAFCU looks forward "to a continued, productive dialogue with the Federal Reserve on issues important to credit unions and their communities."
The statement also noted that when Yellen testified before the before the Senate Banking Committee in mid-November, she acknowledged the need for regulatory relief for small institutions, including credit unions.
Her nomination easily passed the Senate 56 to 26, with several senators absent due to weather. In contrast, Bernanke was confirmed for his second four-year term by the Senate 70 to 30, one of the smallest confirmation margins for a Fed chair.
Yellen received overwhelming support from Democrats, particularly those on the left.
Rep. Maxine Waters, the lead Democrat on the House Financial Services Committee, said Yellen's expertise would aid her assessment of Fed policies affecting the middle class.
"Her judgment on the economy has been validated time and again. Before the crisis, she saw the bubble for what it was and predicted disaster in the banking system," the California Democrat said in a press release. "When the crisis actually happened, she advocated for the urgent need to implement financial reform quickly in order to avoid another meltdown, which was vitally important to staunch the bleeding."
But many Republicans still opposed her due to her support for the Fed's current monetary policy.
"My concerns about the Fed's easy money policies and inflation led me to vote against Chairman Bernanke in his second term at the Fed," said Sen. Charles Grassley, R-Iowa, on the Senate floor. "Because it appears that Ms. Yellen will continue to pursue these misguided policies, I cannot in good conscience vote in favor of her confirmation."
Others like Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, urged Yellen to bring even further transparency to the central bank in its approach to monetary policy.
"Dr. Yellen has spoken favorably about such a rules-based policy in the past, saying it is what 'sensible central banks do,'" said Hensarling in a press release. "It is important for the Federal Reserve to operate in the most transparent, predictable manner it possibly can to better serve the American people, and our committee has an obligation to carefully scrutinize the Federal Reserve's decisions and the way it communicates those decisions to the American people.
Given her previous roles, Yellen is expected to take a more hands-on role in regulation than her predecessors. For the first time since Volcker, she will come to the job with significant bank regulatory experience. She has been credited with identifying looming threats prior to the financial crisis.
Yellen, 67, has largely kept mum on regulatory issues in her public remarks and has stuck to the consensus view by the Fed that breaking up the largest banks would not be the right solution to ending "too big to fail."
She has also stressed the importance of eradicating "too big to fail," naming it one of the most important goals of the post-crisis period.
"That must be the goal we try to achieve," said Yellen at the November hearing. 'Too big to fail' is damaging. It creates moral hazard. It corrodes market discipline. It creates a threat to financial stability, and it does unfairly, in my view, advantage large banking firms over small ones."
Like her counterparts at the Fed, Yellen was clear that she recognized the importance of not overburdening community banks with new regulatory laws.
The former University of California Berkley economist will also have to steward the Fed's unprecedented quantitative easing program under her tenure.
The Fed agreed under Bernanke's chairmanship to begin tapering its purchases of Treasury and mortgage-backed debt to a pace of $75 billion a month from $85 billion a month in December given new economic data.
—Additional reporting by Marian Raab
