Tags: Yellen | bank | Glass-Steagall | dove

Huffington Post: Yellen's Not So Progressive Past

By    |   Thursday, 19 September 2013 08:08 AM

Progressives are backing Janet Yellen as the next Federal Reserve chairman, but she has a very unprogressive past.

Yellen, now the Fed's vice chairman, supported repealing the Glass-Steagall division between commercial and investment banking, passing banking deregulation, passing the North America Free Trade Agreement (NAFTA) and lowering Social Security payments by changing how cost-of-living increases are calculated, The Huffington Post reports.

Progressives criticized former Treasury Secretary Larry Summers, another Fed chairman candidate, for his positions on deregulation, helping to prompt Summers to withdraw his name from consideration. But Yellen took some of the same positions in the 1990s when both served in the Clinton administration, according to The Post.

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As chairman of President Clinton's Council of Economic Advisors in 1997, she supported repealing the Glass-Steagall Act, which put up a wall between investment banking and traditional, safer commercial banking, calling it modernization. Repealing that wall is often blamed for creating the financial crisis and allowing the creation of "too big to fail" banks.

Yellen supported using the chained consumer price index (CPI) to calculate cost-of-living increases for Social Security benefits. The chained CPI reduces Social Security payments by estimating a lower inflation rate than the current CPI.

"I believe we need as accurate a measure as we can possibly have of the cost of living," Yellen said in 1997. "I believe that we are now obtaining broad agreement among professionals that the CPI does overstate the actual increase, properly measured, in the cost of living."

In 1993, she signed a letter along with other academics to Clinton advocating NAFTA, which was criticized by liberals for lacking labor, consumer and environmental protections.

"The agreement will be a net positive for the United States, both in terms of employment creation and overall economic growth," the letter reads. "Specifically, the assertions that NAFTA will spur an exodus of U.S. jobs to Mexico are without basis. Mexican trade has resulted in net job creation in the U.S. in the past, and there is no evidence that this trend will not continue when NAFTA is enacted. Moreover, beyond employment gains, an open trade relationship directly benefits all consumers."

The perception of Yellen as a monetary dove may also be mistaken.

There's no indication that Yellen would be less likely than Summers to increase rates if faced with inflation, according to Fortune.

"Contrary to what has been largely said and written, this sweet dove may prove to have very sharp talons," the magazine states.

Yellen also told the Financial Crisis Inquiry Commission that she didn't see the risks of securitization that enabled the housing bubble and probably would not have pushed for stronger regulations.

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Progressives are backing Janet Yellen as the next Federal Reserve chairman, but she has a very unprogressive past.
Thursday, 19 September 2013 08:08 AM
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