It seems mainstream economists want President Obama to nominate Janet Yellen to become the next Federal Reserve Chair. According to a letter written to the president, 300 economists, including Nobel laureate Joseph Stiglitz and former central bank officials Alan Blinder and Alice Rivlin, want Yellen to succeed Bernanke next year.
On Sunday, Heidi Hartmann, president of the Institute for Women’s Policy Research, initiated the letter and had garnered more than 250 signatures in just 24 hours. The letter can be viewed on the organization’s website and Hartmann confirmed that she will be sending the letter to the White House next week.
Hartmann argued to CNN that the media had been making the case for Summers and the purpose of the letter was to show to the United States that professional economists see Yellen as a much better option.
Why? Well, according to Hartmann, she was one of the first Fed officials to warn about the pending housing collapse. It is also said that Yellen has a clear understanding of how labor markets work and has been dedicated to bringing this understanding through public speeches and scholarly writings.
“In conclusion, we believe that Janet Yellen is an extremely effective leader who has demonstrated her capacity to work with the other FRB governors and to bring important perspectives of the American people to her leadership and decisions,” the letter stated. “In our opinion, she is the best possible leader for the Federal Reserve Board at this critical time in our nation’s history.”
Unfortunately for supporters of Yellen, her past speeches don’t really seem to indicate that she is a superb forecaster and even understood that a collapse was imminent at the time. In an early 2007 speech at the Joint Rotary Clubs of Reno and the East Bay, Yellen stated in her oration:
“While the decline in housing activity has been significant and will probably continue for a while longer, I think the concerns we used to hear about the possibility of a devastating collapse—one that might be big enough to cause a recession in the U.S. economy—have been largely allayed.”
In a speech later that year, Yellen said:
“To sum up the story on the outlook for real GDP growth, my own view is that, under appropriate monetary policy, the economy is still likely to achieve a relatively smooth adjustment path, with real GDP growth gradually returning to its roughly 2½ percent trend over the next year or so, and the unemployment rate rising only very gradually to just above its 4¾ percent sustainable level.”
If appointed by the president, Yellen would become the first female to helm the Fed.