Janet Yellen

Education: Pembroke College; Yale University

American economist Janet Yellen was the chair of the Board of Governors of the Federal Reserve System from 2014 to 2018. She held several positions within the Federal Reserve, including president of the Federal Reserve Bank of San Francisco and chair of the White House Council of Economic Advisers under US President Bill Clinton. A Keynesian economist, she believes that during recessions, a nation’s economic output is influenced by the total spending (the aggregate demand) in the economy. In 2021, she became the first female Secretary of the Treasury.

Yellen initially studied mathematics at the all-women Pembroke College in Providence, Rhode Island, which merged with Brown University in 1971, but she quickly changed her focus to economics because she believed the subject to be more beneficial. Following graduation in 1967, she attended Yale University in New Haven, Connecticut, for her doctorate degree. There she studied under Nobel Prize winner James Tobin. Her doctoral thesis was titled Employment, Output, and Capital Accumulation in an Open Economy: A Disequilibrium Approach.

In the late 1970s, Yellen began working as an economist for the Federal Reserve. She left that position after a year to lecture at the London School of Economics and Political Science in England. After returning to the United States in 1980, she became a faculty member at the Haas School of Business at the University of California, Berkeley, until she left to serve on the Federal Reserve Board of Governors in 1994.

In 2004, Yellen accepted the position of president and chief executive officer (CEO) of the Federal Reserve Bank of San Francisco. Due in part to her outstanding work, she was then nominated as vice-chair of the Federal Reserve in April 2010. On January 6, 2014, Yellen was confirmed as chair of the Board of Governors of the Federal Reserve under President Barack Obama, becoming the first woman to hold the position.

Background

Janet Louise Yellen was born in Brooklyn, New York, on August 13, 1946, to Anna Blumenthal and Julius Yellen. Julius was a family doctor, and Anna was a teacher at a junior high school. Yellen was a star pupil at Fort Hamilton High School in Brooklyn and did very well in several subjects. She was the editor in chief of the school paper and graduated in 1963 as class valedictorian.

Yellen's good grades in high school earned her a scholarship to study mathematics at Pembroke College in Providence, Rhode Island. (Pembroke, a women’s college at the time, merged with nearby Brown University in 1971.) Shortly into her freshman year, she changed her focus to economics, which she believed was more useful than mathematics. She graduated summa cum laude from Pembroke in 1967 and continued her education at Yale University in New Haven, Connecticut.

At Yale, Nobel Prize winner James Tobin, who had become well known for his breakthrough ideas on taxation, mentored Yellen in economics. Her doctoral thesis was titled Employment, Output, and Capital Accumulation in an Open Economy: A Disequilibrium Approach. She earned a Ph.D. in economics in 1971.

Following graduation, Yellen became an assistant professor at Harvard University in Cambridge, Massachusetts. One of her students was Larry Summers, who went on to become a renowned economist in his own right. She taught at Harvard from 1971 to 1976, never securing tenure, and then served as an economist with the Federal Reserve Board of Governors from 1977 to 1978. Yellen next went abroad to lecture at the London School of Economics and Political Science until 1980.

Yellen returned to the United States and began teaching graduate and undergraduate students at the University of California, Berkeley’s Haas School of Business. She coedited the 1986 essay collection Efficiency Wage Models of the Labor Market with her husband, fellow economist George A. Akerlof.

Early Federal Career

In the mid-1990s Yellen took a leave of absence from the university in order to serve on the Federal Reserve Board of Governors. In order to serve, an individual must be nominated by the president of the United States 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.

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.

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.

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.

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.

Vice-Chair of the Federal Reserve

In April of 2010, Yellen was nominated as vice-chair of the Federal Reserve, and she was confirmed by the US Senate the following September, replacing economist Donald Kohn.

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. This was a controversial approach that led more conservative economists to believe the government should stop buying bonds.

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. Trump claimed that the Dodd-Frank Act was preventing businesses from getting loans; in response, Yellen testified in front of the Senate Banking Committee in February 2017 that there was no merit to this claim, and that lending had expanded since the passage of the act, particularly for small businesses, of which just 4 percent had difficulty getting loans.

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. The move was without precedent, as the central bank's holdings had never grown so large before, and therefore it had never before had to divest such a large amount of assets. Yellen planned to divest the holdings slowly, at an initial rate of $10 billion per month and then scaling up over time, in order to minimize potential disruption to the economy.

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.

Besides the various positions she has held at the Federal Reserve, Yellen has also worked on numerous external services and assignments, earning a fellowship at the American Academy of Arts and Sciences and serving as vice president of the Western Economics Corporation and research associate of the National Bureau of Economic Research. She has also served on the advisory boards of the Center for International Political Economy and the Brookings Panel on Economic Activity.

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. She also served as an adviser to the Climate Leadership Council and promoted a carbon tax as an economically efficient means to reduce emissions. As a private citizen, Yellen accepted numerous speaking engagements and continued to offer observations and advice regarding macroeconomic policy.

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. 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.

Impact

After becoming head of the Federal Reserve, Yellen established a mandate to return the inflation rate to 2 percent and to bring the unemployment rate to zero. President Obama praised her for her solid judgment and ability to build consensus among the rest of the board of governors of the Reserve.

When she was appointed to the position, succeeding former chair Ben S. Bernanke, the US economy was still trying to recover from the 2007–2008 financial crisis that led to high unemployment and slow inflation. Yellen entered the position with a positive attitude toward resolving those problems. By the time she left the Reserve, unemployment was 4.1 percent, the lowest rate since 1970 and a 2.6 percent drop from the beginning of her tenure. The stock market had hit record highs, and inflation remained very low. Despite that, President Trump did not reappoint her, making her the first Fed chair not to be reappointed after a full first term.

Over the course of her career, from the time she was a faculty member at Berkeley through her appointment as chair of the Federal Reserve, Yellen has received numerous honors and awards. At the 1997 Women’s Economic Roundtable, she was awarded the Maria and Sidney Rolfe Award for National Economic Service. The same year, Yale University awarded her the Wilbur Lucius Cross Medal for her achievements as an alumnus. In 1985 and 1988 she was given the Earl F. Cheit Award for Excellence in Teaching. In May 2000 she received an Honorary Doctorate of Human Letters degree from Bard College in Annandale-on-Hudson, New York. In 2018, the Federal Reserve Board established an annual award in her honor, the Janet L. Yellen Award for Excellence in Community Development.

Bibliography

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Applebaum, Binyamin. "Yellen Sets a Familiar Direction for the Fed." The New York Times, 11 Feb. 2014, www.nytimes.com/2014/02/12/business/yellen-testifies-in-congress-on-economy.html. Accessed 2 Oct. 2024.

Blinder, Alan S., and Janet L. Yellen. The Fabulous Decade: Macroeconomic Lessons from the 1990s. Century Foundation Press, 2001.

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Da Costa, Pedro Nicolaci. "Fed's Yellen Speaks Out against Trump's Wall Street Deregulation Push." Business Insider, 14 Feb. 2017, www.businessinsider.com/feds-yellen-speaks-out-against-trumps-wall-street-deregulation-push-2017-2. Accessed 2 Oct. 2024.

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Gibbs, Nancy. "The Most Unprecedented Thing about Janet Yellen." Time, 9 Jan. 2014, time.com/275/nancy-gibbs-janet-yellen/. Accessed 2 Oct. 2024.

Hirschhorn, Dan, and Alex Altman. "Yellen Says Fed Will Keep Pulling Back on Stimulus." Time, 11 Feb. 2014, time.com/6782/federal-reserve-fed-janet-yellen-stimulus-continuity/. Accessed 2 Oct. 2024.

Johnson, Arbora. "Janet Yellen." National Women’s History Museum, 2021, www.womenshistory.org/education-resources/biographies/janet-yellen. Accessed 2 Oct. 2024.

Long, Heather. "In Sign of US Economy's Strength, Fed to Start Reducing $4.5 Trillion Balance Sheet." The Washington Post, 20 Sept. 2017, www.washingtonpost.com/news/wonk/wp/2017/09/20/in-sign-of-u-s-economys-strength-fed-to-start-reducing-4-5-trillion-balance-sheet/. Accessed 2 Oct. 2024.

Velasco, Schuyler. "Janet Yellen: Where She Stands on Five Key Economic Policy Issues." The Christian Science Monitor, 9 Oct. 2013, www.csmonitor.com/Business/2013/1009/Janet-Yellen-Where-she-stands-on-five-key-economic-policy-issues/. Accessed 2 Oct. 2024.