Janet Yellen was confirmed on Monday to be the first woman to head the Federal Reserve in its hundred year history.
The vote was 56 to 26 with many abstentions. Her confirmation comes after months of grandstanding and opposition from senate republicans. There were 11 republicans who broke ranks with their party in order to give her enough votes to be confirmed. Ben Bernanke, the current chairman of the Federal Reserve will step down from his position on Jan 31st as Yellen takes over.
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Why Yellen Was Picked
Janet Yellen was picked by Obama to head the Federal Reserve for the same reason that many republicans didn’t want to see her nominated. She is expected to continue with the policies that the Fed has already set in place and finish the work of Chairman Bernanke.
Yellen has been quick to warn about the dangers of high unemployment and spoke favorably about the Fed’s bond buying program as a means to stimulate the economy. Republicans have generally been skeptical of the usefulness of the program and remain concerned that it could trigger unsafe bubbles in the market.
In a statement to the press, President Obama reiterated his confidence in Yellen’s ability to lead the Federal Reserve. “I am confident that Janet will stand up for American workers, protect consumers, foster the stability of our financial system, and help keep our economy growing for years to come,” he said.
He continued, “The American people will have a fierce champion who understands that the ultimate goal of economic and financial policy making is to improve the lives, jobs and standard of living of American workers and their families.”
What Yellen Will Face In the Coming Months and Years
Yellen will lead the Federal Reserve shortly after one of its biggest policy decisions in its history. The Fed will begin tapering its bond buying program by 10 billion dollars a month with more cuts expected to come down the road. In short, one of Yellen’s main goals will be to find the right way to wean the economy off of the stimulus that the Fed has been providing up till this point.
With the start of the New Year, there is another major obstacle facing the Fed. It remains unknown what climbing interest rates may do to home purchase sales. There remains a lingering hope among most economists at the Fed that the market will be able to shake them off and slowly get back to normal.
In the event that home sales plunged after interest rates continue to climb, then the Fed may just revert back to its old policies. Bernanke recently stated that if the economy were to take a sharp hit that the Fed would seriously consider slowing or even putting a stop to its tapering. If that were to happen it would give home buyers most likely one last good opportunity to refinance or get a home purchase loan at a low rate. But if the economy continues to pick up as it has, that prospect remains only a distant possibility.
