The Yellen Doctrine: Robust Growth Is the Priority, but Bubbles Matter

Testifying before the Senate Banking Committee on Thursday morning, Janet Yellen, who has been nominated as the next head of the Federal Reserve, confirmed what people who have dealt with her over the years already knew: she’s a very smart and formidable woman. Displaying virtually no sign of nerves in a key confirmation hearing, she gave direct answers to questions on a variety of issues, avoided spooking the markets, and even managed to disarm some of the Fed critics on the panel.

All in all, it was an impressive performance from the sixty-seven-year-old product of Fort Hamilton High School, in Bay Ridge, Brooklyn, if not a particularly surprising one. Senator Sherrod Brown, a Democrat from Ohio, pointed out that Yellen, who has held a number of senior positions at the central bank over the past twenty years, including, most recently, serving as Ben Bernanke’s deputy, might be the most qualified person ever chosen to run the Fed. And yet, she hasn’t been without her critics. During the summer, when there was widespread speculation that President Obama was intent on passing over her in favor of Larry Summers, some anonymous Administration officials questioned whether she had the chops to respond to financial crises and do all the other things that heads of central banks are expected to do. While one accomplished appearance on Capitol Hill doesn’t make Yellen a successful Fed chairwoman, she has already quieted some of the doubters.

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