Yellen Finds Unlikely Advocate at White House: Trump
EghtesadOnline: Janet Yellen’s only advocate in the White House may be the one person who matters most: President Donald Trump.
The incumbent Federal Reserve chair was impressive in an Oval Office interview with Trump on Thursday, several people familiar with the matter said. She made clear to the president that she wants to keep her job, set no preconditions for appointment to a second term, and offered suggestions for the vice chairman position that were welcomed by the Trump team, Bloomberg reported.
Yellen, the first woman to lead the U.S. central bank, also made the case that the economy is doing well, and that Fed policies have been supportive of growth. Trump, who’d be bucking conservatives in his own party if he opts to reappoint Yellen, has said he’ll decide by Nov. 3 who to nominate as Fed chair when her term ends in February.
The president, in a lunch meeting with Senate Republicans on Tuesday, asked for a show of handsin support of Yellen and other contenders for the job -- Stanford University economist John Taylor and Fed governor Jerome Powell. He didn’t announce a winner and most of the senators didn’t raise their hands. But of those who did, "I think Taylor won," said Senator Tim Scott of South Carolina.
Confidence in the central bank is critical for continued economic growth and job creation, something Trump frequently claims as an accomplishment. The president also often touts the stock market’s boom since his election, a run that could be threatened should financial markets perceive him to be seeking a change in direction at the Fed.
Under Yellen, unemployment was at 4.2 percent in September, a 16-year low, and the economy is in its ninth year of expansion. Inflation and interest rates are low and she is gradually backing off crisis-era policies and unwinding the Fed’s $4.5 trillion balance sheet.
Fed spokeswoman Michelle Smith declined to comment on Yellen’s renomination prospects.
Within the White House Trump’s interview of Yellen was regarded as serious, not just a courtesy, two of the people said. The president genuinely considers her a finalist for the job, the people said, despite misgivings among many of his closest advisers.
“I really like her a lot,” he said Friday in an interview with Fox Business Network broadcast Sunday.
Other contenders for the job, Trump said in the interview, are Taylor and Powell, or some combination of the two -- the Fed Board vice chairman position is also open.
Taylor, who invented a widely-used equation for setting interest rates that bears his name, has criticized the Fed’s recent practices and is a favorite of House Republicans. They have passed legislation that would require the Fed to abide by rule-based policy making that would have it explain any deviation to lawmakers, opening a path to government audit of monetary policy. The House bill did not become law.
The Fed’s expansive policies during the global financial crisis, when it rescued Bear Stearns Cos. and American International Group Inc., became a political lightning rod for both parties and Republicans are still calling for a more restrained central bank.
All three of Yellen’s predecessors were renominated by a president from the party opposite of the one who initially appointed them. Trump also faces a diversity issue in his choice. Breaking the glass ceiling at the 100-year-old central bank by appointing Yellen was a significant step for women in finance and economics.
In July, Yellen had an hour-long breakfast meeting at the central bank with the president’s daughter Ivanka, who had reached out to the most powerful woman in economics after reading a speech she gave earlier in the year about the history of female participation in the American labor force.
If she doesn’t get the job that is “a devastating message for women in economics which is already struggling with gender imbalance,” said Julia Coronado, president of Macropolicy Perspectives and a former Fed staff member.
However, Yellen lacks support from key Republicans on the Senate Banking Committee that would vote on her nomination, and among White House staff and Trump allies who want to see change atop the central bank.
“What I’d like to see at the Federal Reserve is new leadership down there," Senator Richard Shelby, the number two Republican on the Banking Committee, said Monday at the Capitol. “I think we can do better.”
Shelby said Powell is “very good” and spoke favorably of Taylor’s credentials as a monetary policy expert.
But Trump’s Fox Business Network interview demonstrated that he grasps the gravity of his choice -- disruptive outsiders may not be good for a central bank that can’t be successful without the confidence of investors and the public.
“It’s a hard decision,” Trump said. “If the right person is in there, a lot of good things can happen.”
Nevertheless, many Republicans retain distrust of her association with the Fed’s extraordinary policies during the financial crisis, and she carries a political stain as an Obama appointee.
“I have disagreed very strongly with the policies, like quantitative easing and the liberal policies that we’ve seen,” Mike Crapo, the Idaho Republican who chairs the Senate Banking Committee, told Bloomberg News Oct. 19.
“I would like to see the Fed change direction,” he said. “Get back to more normal, traditional monetary policy.”