President Barack Obama nominated Janet Louise Yellen on Oct. 9, 2013, to become the chair of the Federal Reserve Board. She succeeded Ben Bernanke and was scheduled to remain a board member until 2024. Yellen was tasked with keeping the gradual recovery of the economy on track. Obama called Yellen, who is the first woman to lead the central bank, “one of the nation’s foremost economists and policymakers” who is “renowned for her good judgment.”
Her first term began Feb. 1, 2014, and was slated to end four years later in February 2018. In November 2017, President Donald Trump decided against offering her a second term and nominated Jerome Powell to replace her. Trump called her “a wonderful woman who has done a terrific job,” but her support for financial regulations possibly hurt her chances of securing a second term.
On Nov. 20, 2017, Yellen announced her resignation from the Federal Reserve Board as soon as Jerome Powell was sworn in. She was the first chair in nearly 40 years to not receive a second term.
Biden Picks Yellen to be Treasury Secretary
On November 23, 2020, President-elect Joe Biden chose former Federal Reserve Chair Janet Yellen as Treasury secretary, in a historic decision that could make her the first woman to lead the department.
Background and History
Janet Yellen was born into a middle-class Jewish family in Brooklyn, N.Y. on Aug. 13, 1946. Her mother was a teacher and her father was a doctor, and she eventually became editor of the Fort Hamilton High School newspaper, from which she graduated as valedictorian. She graduated summa cum laude with an economics degree from Brown University in 1967 and went on to receive her Ph.D. from Yale University in 1971. She then worked as a professor at several prestigious universities, including Harvard, The London School of Economics and the University of California at Berkeley. In 2004 she became president and CEO of the Federal Reserve Bank of San Francisco, where she has been credited with foreseeing the subprime mortgage crisis more accurately than her peers.
She was also a member of a number of economic committees and councils, including the Organization for Economic Cooperation and Development, the U.S. Council of Economic Advisors and the American Economic Association. She served as a governor for the Federal Reserve Board from 1994-97 and has also been an advisor for the U.S. Congressional Budget Office. She was a research associate for the National Institute of Economic Research and was on the board of directors for the Pacific Council on International Policy. She has also held fellowships for the National Association of Business Economics, MIT and Guggenheim.
Before serving as chair, she was the Fed's vice-chair. She was appointed to this role for a four-year term on Oct. 4, 2010, by President Obama. Yellen used her position to convince the Fed to use a 2% annual target for inflationary growth. The Democrats urged Obama to appoint Yellen as chair over former Secretary of the Treasury Larry Summers due to her “impeccable resume, focus on unemployment and solid record as a bank regulator.”
Like her predecessor, Yellen was a staunch dove. Much of the research she performed as an academic economist focused on employment. She and her husband, George Akerlof, are both Keynesian economists who believe that economic markets are fundamentally flawed and need governmental regulation to function correctly. They both created economic models showing how firms seeking to maximize profits would pay higher than minimum wages. This model was a rebuttal to conservatives such as Robert Lucas, who mandated that flexible wages and prices would allow the economy to revert to form more easily after market upheavals. These models helped to form the foundation of the New Keynesian philosophy.
She was the first Democrat to chair the Fed in nearly 30 years but stressed the importance of the Fed being independent of political processes and staying nonpartisan. As chair, she sought to emulate the philosophy of James Tobin, an economist who believed that an economy can be rescued from recession through governmental intervention. She backed Bernanke’s bond-buyback program and continued his stimulus campaign. During her term, she also tightened financial and banking regulations to prevent the past from repeating itself.
During the latter part of her term, Yellen advocated for "gradual rate hikes" believing a sharp rise in rates could hit the economy with an "adverse shock." While the Federal Reserve does not directly focus on stock market returns, the S&P 500 returned 46% since she became Fed Chair in 2014, an average of more than 10% per year.
While in the public eye, Yellen followed Bernanke’s cautious approach, using meticulously researched data and a technocratic manner to minimize surprise announcements or other releases that could roil the markets.
She received the Paul H. Douglas Award for Ethics in Government in 2017. During her acceptance speech, she said the public must believe the Fed is acting only in its interest.