Janet Yellen on April 16, 2013 at the IMF Headquarters in Washington, D.C.
Janet Yellen on April 16, 2013 at the IMF Headquarters in Washington, D.C. - 
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At 3pm today, President Obama is expected to nominated Janet Yellen to be the next Fed chair.

As Fed chairs go, Janet Yellen is pretty well prepared. She’s been at the Fed on and off for the past 20 years. 

“She’s got just a wealth of experience,” says James Wilcox, professor of Finance at U.C. Berkley where Yellen was his colleague for many years. “She’s seen some years that seemed quite prosperous, she’s been through the financial crisis, and she’s been through the aftermath.”

Yellen’s biggest challenge will be -- as it has been for the Fed Chair for several years -- how to stimulate the economy to create more jobs. “The recovery has been underway for several years, but we still have a lot of slack in the economy,” says Wilcox.

At 67, Janet Yellen inherits a Fed that’s been trying unconventional ways to remove that slack. She strongly supported Ben Bernanke’s policy of pumping trillions of dollars into the economy to keep interest rates low. But she will have the delicate task of turning off the tap and pulling that money back out.

“A big part of the fed’s exit strategy -- which will make Quantitative Easing look trivial and unimportant,” says Alan Blinder, a professor of economics at Princeton and a former Fed vice chair himself, “is how and when to judge that it’s time to start withdrawing liquidity from the banking system.”

Pulling back too fast could send interest rates higher and snuff out job growth, moving too slow could trigger inflation. Critics worry Yellen might err on the side of employment at the risk of inflation. Kevin Hassett, now at the American Enterprise Institute, was at the Fed when Yellen was a governor there in the early 90s.

 “There are folks that have a genuine concern that unless you have a real inflation hawk at the Fed, that inflation could spin out of control as it did say in the 70s,” he says.

Yellen advocates, including Nobel Prize winning economist and former Yellen professor Joe Stiglitz, say she’ll act according to her reading of the economy. “She’s enormously pragmatic, she’s not ideological,” he says. “She will look at the situation as it exists. And right now the situation is that we don’t face any inflation problems, we face a serious unemployment problem”

The Fed also has to prevent another banking crisis. It has some new powers, and certainly new expectations, to oversee the financial system. It’s an open question how tough Yellen will be in wielding those powers. Unlike Larry Summers, she’s never worked for a Wall Street Bank, and she doesn’t have his close ties with the White House. In the end she could prove more independent as a Fed chair.

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