Wall Street wants Yellen, not Summers, as next Fed chief

thenews 2014.01.30 22:24 #51

Yellen to be sworn in as first woman Fed chair next week

Janet Yellen, the first woman to chair the Federal Reserve in its 100-year history, will take over the reins of the U.S. central bank on Saturday and formally be sworn in next week, the Fed said on Thursday.

Yellen, 67, who begins her post as the Fed unwinds its unprecedented efforts to boost the U.S. economy, will be sworn in at 9 a.m. EST (1400 GMT) on February 3. She will have full authority as the top central banker from Saturday until the swearing-in ceremony, according to the Fed.

She succeeds Chairman Ben Bernanke, whose second four-year term expires on Friday. Yellen will be sworn in by Fed Governor Daniel Tarullo, a Fed official said on condition of anonymity.

Yellen will be one of a handful of women heading central banks globally. Her main task will be to navigate the U.S. central bank's way out of its extraordinary stimulus, beginning with a further dialing down of its massive bond-buying program, and deciding when to raise rates.

The Fed has already announced a $20 billion reduction in its monthly asset purchases and is expected to completely shut down the program by year-end.

Yellen will remain in her current role as Fed vice chair over the weekend but will have authority to exercise all duties of the chair, the Fed said.

President Barack Obama has nominated Stanley Fischer, former head of the Bank of Israel, to succeed Yellen in the number two position. The Senate must still confirm Fischer for the job, so it will be temporarily unfilled.

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Press review The Fed is heading Traders bet on later

thenews 2014.02.01 19:59 #52

4 big challenges for new Fed Chair Janet Yellen

It will take years to determine whether Ben Bernanke’s 8-year tenure as chairman of the Federal Reserve was successful, but there’s one thing we already know about Bernanke: He was the Master Easer.

Bernanke began cutting interest rates in 2007, a year-and-a-half into his first term as chairman, and kept the easy money flowing until the very end of his time at the Fed. The official end of the super easy-money era came in December, when the Fed announced it would begin to wind down the huge bond-buying program knows as quantitative easing, which took effect at the end of 2008 and was renewed several times.

The Fed says it will still remain “highly accommodative,” keeping short-term rates near zero until at least 2015. But the Fed’s shifting stance is already unnerving markets, as the odds of rising rates in the United States and a whole new monetary policy regime reroute the global flow of money. And with Bernanke leaving the Fed, it’s now up to his successor, Janet Yellen, to deal with all the delayed consequences of the aggressive and controversial policies that dominated his tenure.

The most obvious concern all along has been the risk that the Fed’s “money printing” would lead to runaway inflation somewhere down the road. That could still happen, but every dire prediction of soaring prices has been wrong so far. And the Fed says that if necessary, it can create incentives for banks to keep their money parked at the Fed instead of lending it out and stoking an overheated economy.

Meanwhile, it’s often the problems nobody foresees that turn out to be the real bugaboos. Here are 4 such problems Yellen may have to grapple with:

Bubbles. They’re hard to spot when you’re in them, but there certainly is some risk that artificially low interest rates have pushed stock prices a lot higher than they’d be otherwise. Bernard Baumohl of the Economic Outlook Group points out that margin debt—which is basically borrowed money used to buy stocks--is at an all-time high of $445 billion, driven at least in part by bullish investors who felt Fed policies would continue to push up stock prices.

Wall Street wants Yellen, not Summers, as next Fed chief - page 6