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Why isn't Yellen a shoo-in?

Janet Yellen on April 16, 2013 at the IMF Headquarters in Washington, D.C.

Things could change again, but as of right now, Janet Yellen is likely to be the next Federal Reserve chair. At least, that’s what White House insiders are signaling, now that previous frontrunner Larry Summers has dropped out.

Yellen has deep Fed experience and endorsements from leading economists and Democrats. But she only seems to have risen to the top of President Obama’s list by process of elimination. How Yellen fell behind Summers in this contest critical to monetary policy had precious little to do with monetary policy -- and far more with the politics of proximity.

The president and his top advisers just didn’t know Yellen and felt comfortable with someone they did, Summers. But it wasn’t all a question of personal connections. The new Fed chair will have to unwind the stimulus effort. Summers's fans thought he’d do a better job than a Fed insider who played a key role in putting current policies in place.

“The more substantive point that people make about Yellen is this concern that she will not be quick enough to quote unquote, take the punch bowl from the party,” says ITG chief economist Steve Blitz. He believes Yellen could make a good Fed chair.

The White House wanted the guy they knew. The fact that that guy happened to be a guy played a role in how things got ugly as the nomination process played out in the media.

Summers’s supporters went after Yellen, questioning not so much her credentials, but whether she was aggressive or tough enough and whether she had enough gravitas. It’s a familiar line of attack against women in business and government.

“The word gravitas is a code word for male leader as opposed to female leader,” says Jill Flynn, a former bank executive who founded the leadership consulting firm Flynn Heath Holt.

The attacks on Yellen brought gender politics into the mix and took the debate even further from the actual work of the Fed chair. But if Janet Yellen does ultimately get the job, memories of the bizarre and public hiring process will fade.

“I absolutely believe none of it matters,” says Columbia Business School professor Katherine Phillips. “When she gets in there and she has the authority of the position that she will be in, she will be the only one in that position and people will have to live with it.”

David Gura: Things could change again, of course, but as of now, Janet Yellen is likely to be the next chair of the Federal Reserve.Indeed, the Fed's first chairwoman.

Yellen has a lot of experience at the Fed. She's gotten endorsements from leading economists, from Democratic politicians and progressive groups. But she only seems to have risen to the top of President Obama's list by process of elimination.

So, what in the world was wrong with Janet Yellen in the president's eyes? Marketplace's Mark Garrison reports.


Mark Garrison: How Yellen fell behind Summers in this contest critical to monetary policy had practically nothing to do with monetary policy. Go ahead, just try asking a former Fed economist, like Ann Owen.

Ann Owen: That sounds more like a political question. I mean, honestly, I’m not sure if I’m the right person to answer that question.

The president and his top advisers just didn’t know Yellen and felt comfortable with someone they did, Summers. It was mostly politics. Though not all. The new Fed chair will have to unwind the stimulus. ITG chief economist Steve Blitz points out that Summers fans thought he’d do a better job than a Fed insider.

Steve Blitz: The more substantive point that people make about Yellen is this concern that she will not be quick enough to quote, unquote, take the punch bowl from the party.

The White House wanted the guy they knew, the guy they knew. And that’s where things got ugly. Larry Summers fans went after Yellen in the press, questioning not so much her credentials, but whether she was aggressive or tough enough and whether she had enough gravitas. Leadership consultant Jill Flynn has heard that line before.

Jill Flynn: The word gravitas is a code word for male leader as opposed to female leader.

The attacks on Yellen brought gender politics into the mix and took the debate even further from the actual work of the Fed chair. But if she does get the job, Columbia Business School professor Katherine Phillips says the drama will be irrelevant.

Katherine Phillips: I absolutely believe none of it matters. Because, when she gets in there and she has the authority of the position that she will be in, she will be the only one in that position and people will have to live with it.

If, of course, this bizarre hiring process finally ends with Janet Yellen as Fed chair. In New York, I'm Mark Garrison, for Marketplace.

About the author

Mark Garrison is a reporter and substitute host for Marketplace, based in New York.

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