For better or worse, the Federal Reserve is no longer detached from public opinion about how the 100-year-old central bank should be run.
President Barack Obama will nominate Janet Yellen today to succeed Ben S. Bernanke as Fed chief after unparalleled scrutiny during the selection process. He’ll announce his choice at 3 p.m., a White House official said in an e-mail. Former Treasury Secretary Lawrence Summers, who had been the president’s favorite, withdrew from consideration on Sept. 15 after opposition from fellow Democrats, while Yellen, the Fed’s vice chairman, drew support from more than 400 economists, women’s groups, investors and politicians.
The unprecedented frenzy surrounding the nomination is an extension of the backlash that resulted from the Fed’s bailouts during the financial crisis and also reflects heightened concern about the economy after record monetary stimulus has failed to bring joblessness below 7 percent.
“The Fed has been absolutely in the middle of the hurricane here in the last five years,” James Bullard, president of the Federal Reserve Bank of St. Louis, said in a Sept. 20 interview at Bloomberg’s headquarters in New York. “So, I’m not surprised that, you know, Congress, the White House, the financial markets and the public at large are all very concerned about, well, who’s this person going to be?”
Bullard said the end of Bernanke’s second term -- on Jan. 31 -- provides “a good time to have a debate” about what the nation wants “out of its central bank.”
Yellen, 67, is poised to take over an institution that Bernanke, 59, established as the country’s main rescue agent during the 18-month recession that ended in June 2009. Bernanke gave out more than $2 trillion in emergency aid during the worst financial crisis since the Great Depression, including through the rescues of Bear Stearns Cos. and American International Group Inc.
After lowering his benchmark interest rate to near zero in December 2008, Bernanke has relied on unconventional stimulus measures to pursue the Fed’s goals of full employment and price stability, swelling the central bank’s balance sheet to a record of $3.75 trillion through three rounds of bond buying.
“The Fed used to be on the front page of the business section, and now it’s on the front page of the newspaper,” Randall Kroszner, a former Fed governor and now a University of Chicago professor, said Sept. 24 on a panel at the Bloomberg Markets 50 Summit in New York. The crisis changed the view of its power, which “now is very well known by people who aren’t monetary experts, and that’s going to keep it in the political cross hairs.”