Wednesday, September 18, 2013

Roger Lowenstein’s Reason to Rule Out Janet Yellen

Lowenstein actually thinks we need a banker and not a qualified economist to lead the Federal Reserve:
President Barack Obama should look for a truly “post-crisis” candidate who can reassert the Fed’s independence and move away from the unusual policies of the last six years. During the credit crunch of 2007-2008 and its aftermath, it was proper and right that the Fed and the Treasury Department were joined at the hip: Both had an interest in easing the financial crisis, which took precedence over everything else. It was also proper for the Fed to aggressively lower interest rates -- a popular policy that the administration avidly supported. But the next chairman will have to decide when to trim the Fed’s portfolio, swollen with its extraordinary program of bond purchases. And it will have to raise short-term interest rates, which are currently near zero. It may be sooner, it may be later -- the moment will come. Money cannot be free forever.
I’m sorry but this argument is what I would expect from the National Review and not from Bloomberg. OK, Lowenstein is a financial journalist and not a member of the economics profession. So maybe he can be excused for not realizing that Janet Yellen is smart enough to reverse course on monetary expansion when the economy gets back to full employment. But we are still far away from full employment and with fiscal policy turning contractionary, this is not the time to raise interest rates. And yes – the best candidate for this job is one who recognizes what Roger Lowenstein refuses to. Count me as a member of Team Janet.

5 comments:

rosserjb@jmu.edu said...

This dreck seems to resemble White House murmerings of wanting someone from outside to shake up the Fed, although not necessarily a banker. As it is, if he thinks Yellen will never tighten, she seems to be on board with yesterday's FOMC to begin a small taper, for better or worse, but I still support her.

What gives away what an abysmallhy stupid columnn this one is that after eliminating one possible candidate after another, he fails to name a single one. Does he want somebody like Jaime Dimon? Really, come on. This is a seriously out to lunch column.

Peter said...

yeah put in a banker. cut out the middle man!

I thought Lowenstein was better than this.

rosserjb@jmu.edu said...

Oh, I turn out to be wrong about the taper. I heard a news report earlier in the day saying that they had decided to reduce their purchases by 10-15%, but now hear that they have decided to make no changes at all. Will Obama and gang view this as her not being tough enough on inflation or not willing to go against Fed herds? I am sure they can spin it against her, just as lots of Republicans spin anything Obama does or says against him.

Bob Sharak said...

It's not so much a "reason to" but a "reason why" Janet Yellen might be ruled out. Face. Specifically, Presidential face. Nobody likes to have someone forced on them. That Dr. Yellen was not President Obama's preference, and that his first choice felt compelled to with draw does not bode well for her chances. It will be interesting to see if the President finds a face-saving way to nominate Dr. Yellen or if he finds another candidate instead.

Dan Kervick said...

The article is somewhat incoherent.

Janet Yellen is a banker. She has been working in the Fed as both a governor and a bank president since the 90's with only a brief stint back in government in the late 90's.

Oddly, Lowenstein cites Volcker as someone who was a banker, appealing to his experience as president of the NY Fed. But Yellen was President of the San Francisco Fed for 6 years.