Janet Yellen: A Pioneer in Economics and Public Service
Janet Louise Yellen stands as a towering figure in American economics and public service. Her career is marked by groundbreaking achievements, including being the first person to lead the White House Council of Economic Advisers, the Federal Reserve, and the Treasury Department. From her academic pursuits to her leadership roles during critical economic periods, Yellen has left an indelible mark on economic policy and thought.
Early Life and Education
Born in 1946 in Bay Ridge, Brooklyn, to Anna Ruth, an elementary school teacher, and Julius, a family physician, Janet Yellen's upbringing instilled in her a strong sense of community and intellectual curiosity. Her parents' professions shaped her understanding of both the importance of education and the direct impact of economic realities on individuals and families.
Yellen excelled academically, graduating as valedictorian from Fort Hamilton High School in 1963. She initially enrolled at Pembroke College in Brown University, intending to study philosophy, but soon switched her focus to economics, believing it to be more beneficial. In 1967, she graduated summa cum laude in economics from Brown University. She continued her education at Yale University, where she earned a Ph.D. in economics in 1971 under the mentorship of Nobel Prize winner James Tobin. Her doctoral thesis was titled "Employment, Output, and Capital Accumulation in an Open Economy: A Disequilibrium Approach."
Academic Career
Following graduation, Yellen became an assistant professor at Harvard University, teaching from 1971 to 1976. She was one of only two female faculty members in Harvard's economics department at the time. After failing to win tenure at Harvard, Yellen joined the Federal Reserve's Board of Governors in 1977 as a staff economist.
In 1978, she left her post at the Fed to accompany her husband, economist George Akerlof, to London, where she lectured at the London School of Economics and Political Science until 1980.
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In 1980, Yellen joined the faculty of the University of California, Berkeley's Haas School of Business, where she taught macroeconomics to undergraduate and MBA students for over two decades. She earned the Haas School's outstanding teaching award twice, in 1985 and 1988. She became just the second woman at Berkeley-Haas to earn tenure in 1982, as well as the title of full professor in 1985. She was named the Bernard T. Rocca Jr. Professor of International Business and Trade in 1992 and the Eugene E. and Catherine M. Trefethen Professor of Business Administration and Professor of Economics in 1999. She later became professor emeritus at the Haas School.
Her scholarship has focused on a range of issues pertaining to labor and macroeconomics. Yellen's academic career has largely focused on the analysis of the mechanisms of unemployment and labor markets, monetary and fiscal policies, and international trade. Since the 1980s, Yellen and Akerlof have addressed "efficiency wage theory" - the idea that paying people more than the market wage does increase their productivity. Another work, "An Analysis of Out-of-Wedlock Childbearing in the United States," co-written with Akerlof and Michael Katz and published in 1996, aims to explain why out-of-wedlock births have grown considerably in previous decades in the United States.
Yellen has also served as an adviser to the Congressional Budget Office (CBO), the Brookings Panel on Economic Activity, and the National Science Foundation's Panel in Economics.
Early Federal Reserve Career
In the mid-1990s, Yellen took a leave of absence from Berkeley to serve on the Federal Reserve Board of Governors. She was nominated by President Bill Clinton and approved by the US Senate. Duties of the Federal Reserve include developing a monetary policy for the country, regulating banking institutions, and containing any potential and real risks that arise within the financial markets.
On April 22, 1994, President Bill Clinton announced his intention to nominate Yellen as a member of the Federal Reserve Board of Governors. Clinton praised her as "one of the most prominent economists of her generation on the intersection of macroeconomics and labor markets."
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In July 1994, during her confirmation hearing before the Senate Banking Committee, Yellen said that Fed policies should keep the economy growing as much as possible without accelerating inflation but avoid taking a clear position on the prospect of further increases in interest rates. The Senate panel approved her nomination without much Republican opposition, by a vote of 18 to 1. The nomination was confirmed in the full United States Senate by a vote of 94-6. On August 12, 1994, Yellen was appointed to a full 14-year term and assumed the seat vacated by Republican Wayne Angell.
Yellen held her position on the Board of Governors until February 1997, when she became chair of the White House Council of Economic Advisers under President Bill Clinton. The council performs research and advises the president on economic policies. During her time with the Council of Economic Advisers, Yellen oversaw a June 1998 report, "Explaining Trends in the Gender Wage Gap," which focused on the gender pay divide.
In 2001, her book The Fabulous Decade: Macroeconomic Lessons from the 1990s, which she coauthored with fellow economist Alan S. Blinder, was published. The book examines the economic growth and low unemployment rates in the United States during the 1990s and analyzes how Federal Reserve fiscal policy and other factors contributed to this upswing.
President of the Federal Reserve Bank of San Francisco
Yellen served as chair of the Council of Economic Advisers until 2004, when she became president and CEO of the Federal Reserve Bank of San Francisco.
While in this position in 2005, Yellen became the first federal policy maker to express concerns about rising house prices and the potential for problems in the US economy. In 2007, the credit market plummeted as a result of this housing "bubble," and while Yellen had considered the likelihood of these issues, she and others serving on the federal committee were not able to anticipate the enormity of the financial crisis. In September 2008, financial services giant Lehman Brothers filed for bankruptcy, and the following month Yellen was the first federal official to state publicly that the country had entered a recession.
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Yellen’s position at the Federal Reserve Bank of San Francisco led to a position as a voting member of the interest-rate-setting committee of the Reserve’s Federal Open Markets Committee (FOMC) in 2009. She consistently voted for efforts to stimulate the country’s economy and voiced repeated concerns about the long-reaching effects of the nation’s extended economic stagnation. On June 5, 2009, Yellen said that the Federal Reserve should consider raising interest rates earlier to prevent another housing bubble.
Vice-Chair of the Federal Reserve
In April of 2010, President Barack Obama nominated Yellen to succeed Donald Kohn as vice chair of the Federal Reserve. In July 2010, the Senate Banking Committee voted 17-6 to confirm her. On September 29, 2010, Yellen was confirmed by the Senate on a voice vote to be both a member of the board of governors and vice chairman of the Federal Reserve System. On October 4, the pair were sworn in as Fed governors, while Yellen also took the oath of office as vice chair of the board for a four-year term. Simultaneously, she began a 14-year term as a member of the Federal Reserve Board, filling a vacant seat last held by Mark W. Olson.
By this time Yellen had also become a respected international emissary for the Federal Reserve, a position that took her to economic policy meetings around the world. She became known for her expertise in unemployment, including its origins and consequences, and her belief in risking higher inflation as a means of reducing the unemployment rate.
Chair of the Federal Reserve
In early October 2013, President Barack Obama nominated Yellen to become the new head of the Board of Governors of the Federal Reserve. After the US Senate approved her nomination by a vote of 56-26, Yellen was appointed on January 6, 2014. She officially took office on February 1, 2014, becoming the first woman in history to head the Reserve and the first Democrat to hold the position since 1979.
On February 11, 2014, Yellen delivered her first public testimony on Capitol Hill. During her speech, she stated that as the economy recovered in the wake of the financial crisis, the Federal Reserve would continue to utilize the policy of quantitative easing, in which the central bank buys Treasury bonds from commercial banks to raise the monetary base, which has been shown to stimulate growth and reduce interest rates. Upon the election of Donald Trump as president in November 2016, Yellen spoke out publicly against his stated plans to roll back the financial regulations and protections of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, saying that doing so could increase the likelihood of another crisis like the one in 2007-8 that had led to the passage of the act.
By September 2017, the Federal Reserve had increased its holdings of Treasury bonds and mortgage-backed securities to $4.5 trillion, up from pre-recession levels of around $900 billion. In that month, the Federal Reserve, under Yellen's direction, announced it would begin to reduce its balance sheet, as it believed the US economy to be "on a strong track" and no longer in need of such a large safety net.
Yellen’s monetary policies mirrored those of the Obama administration. She has written numerous scholarly papers, particularly during her time as a professor at Berkeley, concerning unemployment, the labor movement, and the economy. One key theory she formed with her husband is that many employers will not cut wages when unemployment is on the rise.
In November 2017, President Donald Trump declined to reappoint Yellen, and announced that he was nominating Jerome Powell to replace her at the end of her term in February 2018. After leaving the Fed, Yellen joined the economic studies program at Brookings Institution in Washington, DC, as a Distinguished Fellow in Residence.
Regarding labor markets, Yellen has been dubbed one of the Federal Reserve System's most successful chairpersons.
Secretary of the Treasury
In 2020, President-elect Joe Biden announced that he planned on nominating Yellen to his Cabinet as Secretary of the Treasury. On December 1, 2020, then-President-elect Biden nominated Dr. Janet Yellen to the post of Treasury Secretary. In his remarks on the announcement, Biden lauded her as "one of the most important economic thinkers of our time" who "spent her career focused on employment and the dignity of work." Despite being a highly respected figure across the political spectrum and expected to win confirmation easily, she was considered an unusual pick for the position because of her lack of experience in political maneuvering. She took office January 26, 2021, as the first female Secretary of the Treasury and the first person to serve as Treasury Secretary, Chair of the Federal Reserve, and the Chair of the Council of Economic Advisors. During her tenure, Yellen faced a number of economic crises, including a period of high inflation and a lingering suspicion that the economy could have been headed for a recession. Yellen continued to maintain that the US economy was strong and was outperforming what the data suggested.
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