Tags: Yellen | Senate | OK | Fireworks

Yellen Expected to Win Senate OK — After Some Fireworks

Wednesday, 09 October 2013 04:30 PM

Janet Yellen appears set to win U.S. Senate confirmation as the first female Federal Reserve chair given unified support from Democrats, who will only need to pick up a few Republican votes to secure her confirmation.

The debate likely will be contentious as Republicans from the smaller-government Tea Party faction use the nomination — the first for a Fed chair since they took office — as a platform to put the central bank's easy monetary policy on trial.

And the protracted fight in Congress over the debt limit, government spending and Obamacare could also complicate matters and some Republicans are already declaring their opposition.

But in the end, political math favors Yellen. With a 12-10 Democratic majority on the Senate Banking Committee, she can clear the panel on Democratic votes alone and would need the support of just six Republicans to neutralize any procedural hurdles on the Senate floor.

The Senate managed only 30 votes against outgoing Fed chairman Ben Bernanke's last nomination at the height of Congress' anti-Fed animosity in early 2010, when the central bank was preparing to launch massive bond purchases.

Known as quantitative easing, the bond buying aims to drive other borrowing costs lower to help stimulate economic growth and create jobs. Critics fear it could lead to unwanted inflation.

Bill Frenzel, a former Republican congressman who is now a guest scholar at the Brookings Institution, said that if Republicans could not stop Bernanke then, there is little chance that Yellen, widely seen as continuing his policies, will be rejected now.

Most of the opposition is on the fringes, outside the mainstream view of the Fed in the Senate, he said.

"These are people who either don't like the Fed at all or they don't like some of the positions that Dr. Yellen had participated in as vice chairman," Frenzel said. "She is held in such high regard generally in her field that those objections are not going to carry."

John Cornyn of Texas, the No. 2 Republican in the Senate, has already decided to vote against Yellen, his office told Reuters, saying Yellen was "intent on more quantitative easing."

"Ms. Yellen subscribes to the liberal school of thought that the best way to handle to our nation's fiscal challenges is to throw more money at them," Cornyn said in a statement.

Senate Banking Committee member Bob Corker, a Republican from Tennessee, who opposed Yellen in her 2010 nomination as Fed vice chairman, also signaled likely opposition.

"I've seen nothing to change my view of where she is relative to monetary policy in the last two or three years," he told CNBC television. "She wasn't someone I could support back in 2010. I doubt that's going to change."

But some more moderate Republicans are making more favorable noises. Senator Susan Collins, a Maine Republican, called her "clearly a very experienced, qualified individual."

"Right now, I am favorably disposed toward her but I do want to wait until the hearing to see how she answers specific questions," Collins said.

Several financial industry groups with traditionally close Republican ties issued warm statements about Yellen, signaling important support that could influence senators in the party's mainstream and help secure votes.

Tim Pawlenty, a former Republican Governor of Minnesota who sought his party's nomination for president in 2011, said she was "a talented economist who will bring a wealth of experience to the job," in a statement on behalf of the Financial Services Roundtable, of which he is president and chief executive.



Praise for Yellen, currently the Fed's Vice Chair, came quickly from Democrats who effectively blocked the nomination of former White House adviser Lawrence Summers, who was believed to be President Barack Obama's first choice for the job.

"Today is a historic moment for the Federal Reserve, for women everywhere, and for all of us who care about job creation," said Senator Sherrod Brown of Ohio.

Brown and four other Democrats on the Senate Banking Committee had opposed Summers in part because of his advocacy for financial deregulation in the late 1990s when he served at the U.S. Treasury. Many lawmakers and economists say this planted the seeds for financial crisis a decade later.

Their resistance, along with the expected opposition of a number of committee Republicans, meant that Summers could not clear the panel for consideration by the full Senate.

Senator Jeff Merkley, an Oregon Democrat who opposed Summers, called Yellen a "great choice" and "one of the strongest voices on the Federal Reserve Board for job creation."

Senator Heidi Heitkamp, a North Dakota Democrat and another Summers skeptic on the committee, was a bit more circumspect, calling Yellen "an extremely experienced economist with a deep understanding of the Federal Reserve."

Yellen is considered one of the Fed officials most concerned about high unemployment and least worried about inflation.

While that has helped cement support on the Democratic side of the aisle, it has caused unease among Republicans who are worried the Fed's actions risk sparking inflation or fueling asset bubbles. The Fed has held interest rates near zero since late 2008 and has quadrupled its balance sheet to about $3.7 trillion with a series of large-scale bond purchases.

Democrats control the Senate 54-46, but any nomination is likely to need to secure 60 votes to overcome procedural hurdles. But analysts think that is a low bar to clear.

"Given that she is not a highly polarizing figure and is not seen as a partisan, not to mention the gender politics of her being the first woman nominated to lead the Fed, we doubt she will be blocked," Brian Gardner, a senior vice president of broker Keefe Bruyette and Woods, said in a note to clients.

Still, some Republicans will likely use the debate over the nomination to put the Fed's easy-money policies on trial, particularly those allied with the Tea Party movement and elected after current Fed Chairman Ben Bernanke was confirmed in 2010. Bernanke won confirmation to a second four-year term on a 70-30 vote, the narrowest in the Fed's history.

Several Republicans have complained the Fed's bond purchases have strayed into Congress' fiscal policy territory, encouraging more government spending and weakening the U.S. dollar.

Chris Krueger, a political analyst at Guggenheim Securities in Washington, said fiscal battles in Congress also will likely still be on the boil, and partisan animosity inflamed, when Congress gets around to considering the nomination.

"This is going to be a very public and very political spectacle," he said.

But he said one thing in Yellen's favor is that the vote will be taken after a special Senate election in New Jersey on Oct. 16, where Democrats will likely pick up a seat - and a vote.

© 2019 Thomson/Reuters. All rights reserved.

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Janet Yellen appears set to win U.S. Senate confirmation as the first female Federal Reserve chair, but the debate likely will be contentious as Republicans use the nomination as a platform to put the central bank's easy monetary policy on trial.
Wednesday, 09 October 2013 04:30 PM
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