Tags: Fed | Yellen | salary | central bank

Yellen Taking 46 percent Pay Cut to Leave San Francisco

By    |   Wednesday, 11 December 2013 07:21 AM

When Janet Yellen replaces Ben Bernanke at the helm of the Federal Reserve in February, she will be getting more responsibility and taking an annual pay cut of $167,800.

The Fed chair receives a salary of $199,700 a year. Presidents of the Federal Reserve branches make considerably more, ranging from $281,300 for the president of the St. Louis branch to $410,780 for the president of the New York branch. In San Francisco, Yellen's salary is $367,500.

According the Fed's annual reports, the average salary of the 1,375 officers at the branches is more than $200,000, indicating that most probably make more money than the chair does.

Around the world, other central bankers also make more than the Fed chair. The Bank of Japan pays their chair about $230,000. The head of the European Central Bank makes more than $500,000, and England's central banker makes more than $750,000.

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Of course, the big payoff comes when the chair retires, as Alan Greenspan demonstrated. The former chairman makes millions on book deals, consulting and speeches.

However, the relatively low pay does raise questions about motivation. Yellen is losing more than $600,000 in current income to head the Fed for four years. The future payoff is almost certain, but it is also available to her now. Central bankers are obviously motivated by something other than money.

It is possible that the world's central bankers want to demonstrate how smart they are. Old traders often tell newer traders they need to focus more on making money than on being right. Traders can make money by being right less than half the time. If they focus on being right too often, they are not accepting enough risk and they fail to maximize profits.

Central bankers could be more focused on being right than on making money. That mindset often leads to disaster in the financial markets and helps explain why Fed policy has caused so many problems in the past hundred years.

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MichaelCarr
When Janet Yellen replaces Ben Bernanke at the helm of the Federal Reserve in February, she will be getting more responsibility and taking an annual pay cut of $167,800.
Fed,Yellen,salary,central bank
338
2013-21-11
Wednesday, 11 December 2013 07:21 AM
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