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What makes Yellen tick: five facts about the new Fed boss
by Harry Brooks on Oct 10, 2013 at 11:30
Following President Obama's decision to nominate Janet Yellen as Federal Reserve chair, we offer an insight into some the life-changing events which have shaped her views.
1. Yellen the star pupil
Yellen was born in Brooklyn in 1946, the daughter of a junior school teacher and a family doctor. She was a star pupil at high school and won a place to study at Brown University.
She initally studied maths, but soon switched to economics, which she felt was a more practical discipline. Having graduated summa cum laude from Brown she went on to achieve a Ph.D. from Yale University.
In her first job as assistant professor at Harvard Yellen taught Larry Summers, the man she recently beat to the top job at the Fed.
Yellen is married to Nobel Prize-winning economist George Akerlof, and their son Robert is no intellectual slowcoach either - he's an assistant professor at the University of Warwick.
2. Yellen the economic forecaster
Minutes from Federal Reserve meetings reveal that Yellen had considered the possibility of a housing market bubble as far back as 2005, although along with the rest of the Fed she failed to grasp the sheer scale of the coming crisis.
'She was one of the people that did raise alarm bells, but I think like many others who saw the problems coming she did not anticipate the magnitude of the difficulties,' Nobel Prize winning economist Joseph Stiglitz said.
Forecasting growth, inflation and unemployment levels is a major part of the Fed's role, and according to the Wall Street Journal Yellen has produced the most accurate forecasts of all current Fed officials from 2009 to 2013.
3. Yellen the inflation-buster
Yellen's track record suggests she's well aware of the dangers of inflation, and will take the steps needed to keep it under control.
In a speech in 2011 Yellen said the Fed 'is determined to ensure that we never again repeat the experience of the late 1960s and 1970s, when the Federal Reserve didn’t respond forcefully enough to rising inflation'.
Back in 1996 Yellen urged former Fed chairman Alan Greenspan to raise short-term interest rates, warning that the rampant economy could lead to inflation. Greenspan chose to decline her advice.
4. Yellen the unemployment-fighter
Much of Yellen's academic career has been spent studying the effects of unemployment on the economy, and battling high levels of joblessness will doubtless be one of her priorities.
Speaking to the AFL-CIO labour union earlier this year Yellen reflected on the statistic that a quarter of unemployed Americans have been looking for work for over a year: 'My colleagues and I are acutely aware of how much workers have lost in the past five years,' she said.
'These are not just statistics to me. We know that long-term unemployment is devastating to workers and their families.
'The toll is simply terrible on the mental and physical health of workers, on their marriages, and on their children.'
5. Yellen the bank reformer
Along with the rest of the Fed committee, Yellen failed to anticipate the true scale of the financial crash in 2008. In the immediate aftermath of the crash Yellen expressed frustration at how long it took the Fed and others to agree what new rules were needed.
'This experience has strongly inclined me toward tougher standards and built-in rules that will kick into effect automatically when things like this happen that make tightening up a less discretionary matter,' Yellen told the Financial Crisis Inquiry Commission in 2010.
Speaking in June, Yellen suggested that the Fed might increase the capital adequacy requirements for the biggest US banks over and above Basel III rules:
'The goal has been to compel SIFIs [systemically important financial institution] to internalize the costs their failure would impose on society and to offset any implicit subsidy that such firms may enjoy due to market perceptions that they are too-big-to-fail,' she said.