5 reasons Republicans should support Janet Yellen
FORTUNE — Rumors run rampant that President Obama will soon announce his intention to nominate Janet Yellen to be the next chair of the powerful Federal Reserve Board. Yet, the question remains whether enough Republicans will support her nomination to secure Senate confirmation, given their concerns over her support for the Fed’s aggressive monetary interventions commonly known as quantitative easing, or QE. While I share the GOP’s concerns over QE infinity, here are five reasons why I think GOP Senators should nonetheless support her:
1) With a decade of experience in Fed leadership positions, Yellen is supremely well-qualified. This is the same reason everyone else should support her. Moreover, her record suggests that she is not an ideologue. Yes, she puts great weight on reducing unemployment (if only this Administration and Congress had the same clarity of purpose), which gives heartburn to Republicans worried about the potential inflationary impact of the Fed’s monetary accommodations. But, any candidate this President puts forward is going to give priority to reducing unemployment. Yellen’s record also suggests she has a good dose of common sense and is open to arguments that the Fed’s policies have reached the point of diminishing returns, contributing more to asset bubbles and system instability than any possible reduction in the unemployment rate. Noted critics of the Fed’s monetary policies such as Stanford’s John Taylor and Richmond Federal Reserve Bank head Jeffrey Lacker have publicly vouched for Yellen’s open-mindedness and willingness to listen to competing views.
2) She will be independent of the White House. In any administration, Republican or Democrat, we need leadership at the Federal Reserve who will operate independently of political considerations and base his or her decisions on what is needed to promote a stable, healthy financial system, not on propping up the economy long enough to get through the next election cycle. Though Yellen is a Democrat who once worked for Bill Clinton, most of her career has been spent in academia or at the Fed. She has visited the Obama White House exactly once during her tenure. One can only assume she will operate independently of the Administration’s political aspirations, particularly after being put into an embarrassing public competition with White House confidante Larry Summers for the Fed’s top job.
3) She may well be best equipped to get us back to a time when savers earned a decent interest rate and the Fed followed monetary policies which were based on well-understood rules and conventions. For several years now, Yellen has participated in the meetings, looked at the data, and listened to the arguments of her fellow governors and Fed regional bank presidents over the Fed’s extraordinary monetary actions. She knows the landscape as well as anyone and, as such, is best equipped to eventually navigate us out of it.
4) Opposing her would be harmful to the party. This will be an historic nomination. She would be the first woman to head the Federal Reserve. To be sure, a Larry Summers nomination would have been a gift to the Republicans. As the Washington Post’s Ezra Klein wrote before Summers pulled out:
“Every Republican will see an opportunity to hammer the administration’s policies on stimulus and housing. And that’s before anyone gets to scandals in Summers’ past, like the comments on women in the sciences or the Shleifer affair, not to mention the consulting and speaking fees he’ll need to report on his financial disclosure forms.”
Yellen, however, has none of this baggage. Nothing in her past suggests harmful financial conflicts or lapses in ethical judgment. On the contrary, she has demonstrated good judgment and principled conduct throughout her life. And by blocking her, the GOP will risk the public perception that they oppose her because she is outside the male-dominated Wall Street club.
5) The GOP has very little leverage in stopping her from becoming the next Fed chair. It is important that our next Fed chair has full legitimacy through the Senate confirmation process. However, even if the GOP blocked her confirmation, as vice-chair, she still succeeds Ben Bernanke when his term is up at the end of January 2014. If the President wants her as the next Federal Reserve Board chair, he can get his way no matter what the Senate does.
Yes. Yellen’s past suggests that she is a so-called “dove” on monetary policy. However, as I have previously argued, for those who disagree with the Fed’s current monetary policies (and I am one), the best strategy is to focus on the vacancy for vice-chair for monetary policy, which will be created if Yellen is elevated to the top spot. Pressing for a vice-chair nominee who will bring greater diversity of views on the wisdom of quantitative easing would be a smart GOP move. On the other hand, blocking this well-qualified woman and creating uncertainty and weakness in an agency as important as the Federal Reserve would not be a wise course to follow.