On Wednesday, President Obama is going to officially nominate Federal Reserve Vice Chairwoman Janet Yellen to replace the central bank's chairman, Ben Bernanke, when he steps down in January 2014. This isn't exactly unexpected news: Obama was reportedly considering only two people for the job, and the other one, Larry Summers, dropped out in September.
But just because Yellen's nomination was widely anticipated doesn't mean it's not a big deal. It is. Among other reasons, Yellen will be the Federal Reserve's first chairwoman ever, and perhaps the only woman heading up a central bank in a major economy. (Russia, Malaysia, South Africa, and a handful of other developing nations have female central bankers; the Bank of England and the European Central Bank don't even have a single woman on their policy boards.)
And the U.S. isn't just any major economy. Obama has just appointed "the pre-eminent policy economist of her generation to the role of the most powerful central banker in the world," says University of Michigan political economist Justin Wolfers at Bloomberg View.
Assuming she's confirmed by the Senate, Yellen will arguably be the most powerful woman in U.S. history — wielding more authority than any of the four women who have served on the Supreme Court, female Cabinet secretaries like Hillary Clinton and Condoleezza Rice, or female titans of business like former Hewlett-Packard CEO Carly Fiorina. Only Nancy Pelosi, when she was House speaker, can speak to the level of power Yellen will wield.
John Cassidy at The New Yorker explains why Yellen stands alone: "Given the Fed's independence, and its capacity to lend and print money at will — a capacity demonstrated to great effect in recent years — the person who runs the institution is arguably the second most powerful person in the country," after the president. (The New York Times' Binyamin Appelbaum has a helpful primer on what the Fed can, and can't, do.)
Yellen's gender isn't the reason Obama picked her to lead the Fed. Wolfers makes a credible argument that she is "quite simply more qualified for the job than any of her predecessors." She has been vice chairwoman since 2010, but her tenure at the Fed dates back to 1994, when Bill Clinton appointed her to its board of governors, or even further: She was a staff economist at the Fed from 1976 to 1978. From 2004 to 2010, Yellen was president of the San Francisco Federal Reserve Bank.
She also has a long academic paper trail: Between getting her Ph.D. in economics from Yale in 1971 and starting a long stint at Berkeley in 1980, Yellen taught at Harvard and the London School of Economics. She's even married to a Nobel-winning economist, George Akerlof. "No Federal Reserve chairman has been as deeply steeped in both the theory and practice of central banking as she is," says Jackie Calmes at The New York Times.
Economists, Wall Street bankers, and liberal Democratic lawmakers have all voiced strong support for her nomination.
Yellen wasn't a shoo-in for the nod, however. While Summers dropping out paved the way for Yellen, Obama reportedly wanted Summers in the first place because he knows him and trusts him. And a big reason Obama didn't know Yellen is because few women are "part of the tight-knit clubs from which central bank heads are chosen," argues Caroline Freund at The Washington Post:
Because central banks are independent, trust that the chairman's goals are aligned with the administration's interests is more critical than for other appointed positions. Bankers want someone they know and trust, the administration wants the same, and the independence of the institution means you'd better be pretty darn sure. In contrast to Cabinet positions, the Federal Reserve head cannot be fired if he or she strays from administration goals or fails to meet expectations. [Washington Post]
Yellen is already part of the club, though, says Matthew Boesler at Business Insider. If she makes it past Senate Republicans, she will be in "arguably the most powerful policy-making role in the world." But even as vice chairwoman, Yellen's commitment to pushing down unemployment over worrying about inflation has already held sway. "Perhaps it's just as accurate to say that Yellen has already become the most powerful woman in history."
Either way, says the University of Michigan's Wolfers, "I feel reassured that my daughter's economic future is in good hands. I also plan to tell her that she, too, can grow up to become the most powerful economist in the world. It's a potent stimulus."