Yellen's Confirmation Hearing Proved Successful

Janet Yellen had an easy time at her confirmation hearing to be chair of the Federal Reserve. The questioning had a perfunctory tone, suggesting that she had satisfactorily answered the tough questions during her earlier courtesy visits with Senate Banking Committee members. Surprisingly, one Republican even went so far as to ask her how many times she had voted to raise rates while a member of the Board of Governors. She guessed over twenty, and he indicated that it was actually 27 times. Moreover, she stated that she had never voted against a rate increase. The point of the interchange was to demonstrate that, despite her reputation as an unabashed dove, she was not against raising rates to address inflation concerns if the situation warranted. In another exchange, Republican Senator Corker also went out of his way to compliment her on the fact that her answers were the same as they were in his office earlier in the week.

The questioning became pointed only when Yellen was asked about when the Fed would stop its tapering program, and then about how effective the Fed's quantitative easing program has been. In response to the first query, she provided the party line: while the program couldn't go on forever, there will come a time when the Fed sees signs of sustained improvement in the labor market indicating that tapering would be appropriate. As for the effectiveness of the policies, she pointed to the reduction in longer term interest rates and to research suggesting that growth and employment have been greater as a result of Fed policies than they otherwise would have been. Again, these were the same answers Chairman Bernanke would have given had he been testifying before the committee. In other words, she followed the Fed script – "That's our story and we are sticking to it."

One final point – in responding to questions about the Fed's commitment to regulation and its possible lack of transparency on the formulation of supervisory policy, the depth of some of her responses reflected not only her command of the issues but also her understanding of the workings of the Fed and the constraints that Government in the Sunshine Act requirements sometimes impose with regard to Fed transparencies dealing with supervisory issues. All in all, Janet Yellen’s confirmation hearing was a walk in the park, and she successfully avoided providing any clues as to any imminent changes in monetary policy.

By Bob Eisenbeis