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Foreign Policy Analysis

Would Janet Yellin as Fed Chair Mark a Shift in Economic Policy?


JAISAL NOOR: Welcome to The Real News Network.
I’m Jaisal Noor in Baltimore. And welcome to this latest edition of The Black Financial
and Fraud Report. President Obama has officially nominated Janet
Yellen as the chair of the Federal Reserve. If confirmed, 67-year-old Yellen will be the
first woman to head a major central bank. She has served as the Fed’s vice chairman
since 2010 and is a proponent of strong policies to reduce unemployment rather than obsessive
focus on inflation. Now joining us to discuss this is Bill Black.
He’s an associate professor of economics and law at the University of Missouri-Kansas City.
He’s a white-collar criminologist, former financial regulator, author of The Best Way
to Rob a Bank Is to Own One, and, of course, a regular contributor to The Real News. Thank you so much for joining us, Bill. BILL BLACK: Thank you. NOOR: So, Bill, what is the significance of
President Obama nominating Janet Yellen and not nominating Larry Summers? BLACK: The significance is that it demonstrates
that progressive Democrats actually can succeed, because but for the unusually strong opposition
of progressive Senate Democrats, who indicated that they would not vote in support of a nomination
of Larry Summers, Larry Summers pretty clearly would have been President Obama’s choice,
and it’s likely that the Republicans would have approved Summers as well. So you’re seeing
the virtue of progressives actually digging in their heels and saying, no, we’re not going
to say yes to the people that created the policies that drove the crisis. NOOR: Now, what is the significance–can you
talk more about the significance of Yellen being nominated? And does this mark a significant
shift in policy from her predecessors? BLACK: Yes. I mean, the news stories, being
the way they are, emphasize gender, but the clear thing is that but for her gender, there
would have been no question but that Yellen would have been the first choice, because
she has the absolute superb background in addition to this being her second stint on
the Federal Reserve. As you said, she is currently the vice chairman and the number-two person.
She has also been the chairman of the President’s Council of Economic Advisers, and she’s been
the president of the Federal Reserve Bank of San Francisco. So she’s run a regional
Fed and she’s considered one of the top economists in the country. Indeed, The Wall Street Journal has paid her
two unintentional compliments. One, they did a study on which of the Fed members’ prognostications,
in other words predictions, proved to be most accurate, and they found the answer was Janet
Yellen’s. And second, there is an op-ed in The Wall Street Journal denouncing her appointment
as dangerous because she cares about unemployment. And the tagline at the end of their video
is, wow, that’s frightening. So, it apparently really does frighten the hard right that there
might be someone that would take seriously the legal mandate that the Federal Reserve
has to seek full employment. So the real change here is that this will
be the first Democratic appointee–assuming she’s approved–in over 25 years. People tend
to forget that President Obama reappointed Ben Bernanke, a fairly partisan Republican,
to the position as chair of the Federal Reserve after he had been a complete disaster as a
regulator and refused, despite clear legal authority, to stop all liars’ loans. He refused
to use that authority, and finally only did so under pressure from Congress in 2008 after
liars’ loans had already disappeared. And even then he delayed the effective date of
the rule for 15 months, because you wouldn’t want to inconvenience a fraudulent lender. So this is an incredible change of over a
quarter century of complete Republican dominance of the Federal Reserve. Finally a president,
a Democratic president, is actually going to put a Democrat in charge. And remember,
Clinton before reappointed Alan Greenspan, who of course was even more insane than Bernanke
about how fraud didn’t exist and was with the Rubinites–that includes, of course, Larry
Summers, the leading architect of the deregulation that brought us this crisis. NOOR: And, Bill, the likelihood that she will
get confirmed in the Senate? BLACK: Well, not my area of expertise to guess
about Congress, but the media believes that there is a very good chance that she will
be confirmed. She is superb. She was by far the most qualified candidate for the job.
As I said, but for the fact that she’s a woman, she clearly would have been Obama’s first
choice. And the Republicans would, if they attacked her, probably make clear the sexist
nature of their challenge, because they don’t have much good to say on substance. She is, by the way, also (talk about power
couples) the spouse of George Ackerlof. And listeners will probably remember George Akerlof
with Paul Romer as the author of the famous paper “Looting: The Economic Underworld of
Bankruptcy for Profit”. So these are the economic scholars who have warned the most that deregulation
is exceptionally criminogenic and that the big danger is the CEO looting the bank. So one of the hopes is that Janet Yellen would
also be the first head of the Federal Reserve to actually take regulation seriously. And
if she does, well, from her own expertise and from her spouse, she has, you know, the
superb basis in economics and criminology and past regulatory successes for figuring
out how to make the Fed, for the very first time in its history, an effective financial
regulator. NOOR: Thank you so much for joining us, Bill. BLACK: Thank you. NOOR: Thank you for joining us on The Real
News Network.

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