Fed Chair-to-be Janet Yellen met with members of the Senate Banking Committee Thursday during her confirmation hearing. Among those in attendance included Sens. Charles Schumer (D-NY), Elizabeth Warren (D-MA), Mike Crapo (R-ID) and Tim Johnson (D-SD). Yellen faced a slew of questions regarding the economy, as well as the recovery. Marketwatch provided a liveblog of the event, and some aspects will be highlighted below:
"The Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy," Yellen said during her opening remarks.
In response to a question regarding the potential “infinity” of quantitative easing (QE), Yellen stated, “I believe that this program cannot continue forever.” Yellen added, “It’s important not to remove support, especially when the recovery is fragile and the tools available to monetary policy, should the economy falter, are limited given that short-term interest rates are at zero.”
The prediction for the entire Yellen hearing was that she would defer to the latest in Fed policy, which is essentially what she did. A surprising aspect of Yellen’s discourse during the hearing included her discussing using monetary policy to combat “asset bubbles.” This is a concept that Alan Greenspan was staunchly against and Ben Bernanke isn’t a huge fan of either, however; Yellen being into the idea is a drastic departure. “I consider it imperative that we do what we can to promote a very strong recovery,” she said.
Unsurprisingly, Yellen voiced her support of the Fed’s decision regarding the big banks. This shouldn’t surprise many, however; it doesn’t do much to sway her popularity in terms of targeting those big banks. As reported previously, Yellen was responsible for a series of Clinton-era deregulation that has since become wildly unpopular.
Yellen also managed to dodge a variety of questions, such as those posed by Sen. Sherrod Brown (D-OH) regarding the big banks and their obvious ducking of legality. Even during the hearing’s big moment – the potential showdown between Senator Warren and Yellen, there wasn’t much in terms of fireworks. Warren simply stated that stricter regulation would eliminate the need for QE, but didn’t press Yellen to go further into the discussion.
Overall, the hearing wasn’t particularly exciting other than Yellen’s Matrix-like dodging of Brown’s verbal bullets, there weren’t too many highlights. The hearing was sealed with Schumer praising Yellen’s Brooklyn roots, stating “Your Brooklyn wisdom shines through.”
Whether that “Brooklyn wisdom” will result in proper Fed oversight is anyone’s guess.