Back in September, when the prospect of Donald Trump becoming American president still seemed unlikely, he launched a scathing attack on the integrity of the woman hailed by Forbes as the third most powerful in the world.
Janet Yellen, head of the Federal Reserve System, America’s central bank, had created a “very false economy” by keeping interest rates artificially low, he said. The Fed, which prides itself on its political independence, he claimed, had done this to support Barack Obama’s presidency, and Yellen “should be ashamed of herself”.
Yellen, appointed by Obama in 2014 as the first woman to chair the Board of Governors of the Federal Reserve System since its creation as an independent agency in 1913, was not ashamed. A week later, after announcing that the Fed had decided once again not to raise interest rates, she told a press conference that “we do not take politics into account in our decisions”.
The Fed’s job is to keep US employment high and inflation low. In December, shortly after Trump was elected and with both objectives in hand, the Fed finally raised interest rates, for only the second time in a decade, by 0.25 percentage points. On Wednesday it raised them again, by another 0.25. Contradicting Trump’s claims that he had inherited an economy in “a mess”, it was “doing well”, Yellen said.
Trump is now in a bind, which probably explains his uncharacteristic lack of a knee-jerk Twitter response to Wednesday's rate rise. On the campaign trail, as Vanity Fair noted this week, he had "screamed incessantly about … Yellen, accusing her of keeping rates low to juice Obama's economy". Now president, "Trump wants the good times to keep rolling, accelerating economic growth so that he can pay for his infrastructure plan, military build-up and other passion projects".
After Wednesday's announcement, Jared Bernstein, former chief economist to Obama's vice president, Joe Biden, predicted in The Washington Post that "any day now, if he hasn't already beaten me to it, Trump [will start] tweet-shaming the Fed for raising rates".
In September, when Trump accused Yellen of manipulating the economy for political ends, analysts predicted trouble ahead. The markets “would not enjoy” a Trump dispute with the Fed, wrote Greg Valliere, chief global strategist at Horizon Investments, in an advisory note. “If he wins, the prospect of a public spat between Trump and Janet Yellen will loom by spring.”
Spring is here and, it seems, trouble is in the air.
Janet Louise Yellen was born in Brooklyn, New York, on August 13, 1946, the daughter of Anna, a primary school teacher, and Julius Yellen, a doctor. In 1962 she graduated as valedictorian from Fort Hamilton High School, Brooklyn, where fellow students would later recall her as “a soft-spoken nerd”.
That nerd was poised to blaze a stellar career in the upper firmament of economics, however, a notoriously male-dominated field. In 1967, she graduated with top honours from Brown University, and in 1971, she added an economics doctorate from Yale to her CV. That same year, she began a five-year stint as an assistant professor at Harvard.
In 1977, she landed a job as an economist at the Fed, but for the first and last time, she put her career on hold for her husband’s. Shortly after joining the Fed, Yellen met and married high-flying economist George Akerlof, who in 2001 would win the Nobel Prize for economics.
“We liked each other immediately and decided to get married,” Akerlof later recalled. “Not only did our personalities mesh perfectly, but we have also always been in all but perfect agreement about macroeconomics.”
Akerlof had been offered a professorship at the London School of Economics, so Yellen turned her back on the Fed and spent the next two years in the United Kingdom, lecturing at the LSE.
In 1980, the couple returned to the United States with professorships at the University of California at Berkeley. Their son, Robert, born the following year, was a chip off the block – he’s now an associate professor of economics at Warwick University in England.
In August 1994, Yellen finally returned to Washington, taking leave from Berkeley to join the Fed’s board. In 1997, President Clinton appointed her chairwoman of his Council of Economic Advisers. This time, it was her husband’s turn to follow her. “Berkeley gave me full-time leave,” Akerlof later recalled. As his wife roamed the corridors of power, first at the Fed and then the White House, he “supported her as much as possible by taking over household duties”.
Yellen had a lot on her plate. From 1997 to 1999, she was also chairwoman of the Economic Policy Committee of the Organisation for Economic Co-operation and Development.
In 2010, Barack Obama nominated Yellen for a four-year term as vice-chairwoman of the Fed. Again on Obama’s recommendation, in February 2014, she succeeded Ben Bernanke as chair of the Board of Governors of the Fed, for a four-year term that will end in January.
The appointment of the first woman to the job in the Fed's 104-year history was a remarkable victory against the odds. "A woman has to … prove more than once that she's as good as anybody else," economist Meghnad Desai, who worked with Yellen in the 1970s, told The Washington Post. The "soft-spoken nerd" from Brooklyn had "punched her way to the top by sheer ability".
Not that her career has been without glitches. In 2005, while serving as president of the Federal Reserve Bank of San Francisco, Yellen voiced concerns about America’s rapidly growing property bubble during a speech at Berkeley’s Haas School of Business, but argued against intervention.
“Those of us who live in the Bay Area know that you can’t get through a cocktail party without some discussion of an eye-popping price somebody just got for their two-bedroom, one-bath handyman special,” she joked. But if and when the bubble popped, the effect would be “large enough to feel like a good-sized bump in the road, but the economy would likely to be able to absorb the shock”.
It has taken the entire world a decade to absorb the shock that was actually unleashed when the bubble burst in 2007.
Perhaps that was why Yellen's first speech after becoming chairwoman of the Fed in 2014 was given not to bankers but to a conference for urban regeneration organisations, to emphasise "her very public commitment to improve the economy as ordinary people, rather than market players, experience it", as a profile in The New Yorker put it. "I wanted … to emphasise that unemployment is part of our mission," Yellen said at the time. "The recession has taken a particularly heavy toll on those who have less education [and] I was trying to explain that we're doing this to help American families who are struggling in the aftermath of the Great Recession."
How the duel will play out between the chairwoman of the Fed, the first Democrat in the post for 35 years, and the man judged by Forbes to be only the second most powerful in the world – after Vladimir Putin – remains uncertain. Trump has said he will kick Yellen out of the job; she said she will be staying put until her four-year tenure expires.
Either way, Trump should bear in mind that, chairwoman or not, Yellen will be going nowhere any time soon. Under the Fed’s rules, designed to raise it above the ebb and flow of politics, when she was appointed in 2014, she also began a fixed 14-year term as a member of the board, which doesn’t expire until 2024. Where Trump will be then is anyone’s guess.
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