WASHINGTON — Janet Yellen has had a week to digest her nomination to the vice chairman position at the Federal Reserve. Now it’s time to handicap the Senate confirmation process awaiting her when the storm over financial reform settles.
Most experts see Yellen as an overwhelming favorite to breeze through the confirmation and take over for Donald Kohn as the second in command to Chairman Ben Bernanke. As president of the Federal Reserve Bank in San Francisco, Yellen has already been through the vetting process that can give nominees trouble several times. She was last confirmed in 2006.
“I can’t imagine the incremental part of her life since she’s last been vetted is going to turn up anything at all questionable,” said Alan Blinder, a vice chairman of the Fed under President Bill Clinton who is now a professor of economics at Princeton University. “I don’t think she’s going to have any problems of that nature.”
Yellen is widely thought of as a monetary dove, meaning she favors keeping interest rates low and is more concerned with rising unemployment than she is with inflation. With job creation and retention the hottest of topics on Capitol Hill, her dovish leanings should give her a strong push toward confirmation.
The nuts and bolts of confirmation
So once you’re nominated for a post on the Federal Reserve’s Board of Governors, you shake some hands, make some calls, go through a confirmation hearing and take your fancy, new office on the corner of 20th Street NW and Constitution Avenue NW in Washington, DC. Sounds easy right? Wrong. The logistics of the confirmation process can be grueling, and “it’s gotten worse” according to Alan Blinder, who was vice chairman of the Fed from 1993 to 1996.
“First of all you fill out humongously detailed and very badly organized disclosure forms, in which you tell all,” Blinder began as he remembered back to when he went through the process. “Then you have this checking of the information by the FBI and others.”
When Blinder says you tell all, he truly means all. The forms ask for personal information going back to when the nominee turned 18 years old.
“One question I found amusing when I did it was they wanted every address you lived at since age 18, which for a lot of people is a pretty tough question,” Blinder said with a laugh.
After all the forms are sorted out and everything is on the up and up, the Senate Banking Committee takes over the proceedings. Before the hearing, Blinder said it’s customary for the nominee to make courtesy calls on committee members. Getting in front of the committee can also take awhile, especially with the committee’s busy schedule at the present time.
Even when the hearing is complete, the nominee may end up waiting for some time before the committee votes. It takes a simple majority to be approved by the committee and sent to the Senate floor, where another simple majority wins confirmation. Of course, any senator can hold up the vote at the committee level or in the Senate, and that can stretch on theoretically in perpetuity.
While this can potentially be an excruciatingly long process, Blinder doesn’t think Yellen will have any problems.
“She gets on with people very well,” Blinder said “She’s able to see the other person’s point of view and argue against it without being nasty. She’s a great nominee and she ought to sail through.”
Where Yellen might run into a problem, Blinder said, is if a senator, for one reason or another, stands in her way via what is called a hold. Blinder’s 1993 confirmation was held up for two months because Republicans blocked all of Clinton’s nominations until the GOP was granted a special committee on the Whitewater scandal.
“Sometimes holds are put on people for completely extraneous reasons having to do with political battles and not having to do with the candidate at all,” Blinder said. “Nobody is immune from that and it happens whimsically. It could have something to do with an impasse over the financial reform bill or immigration or anything else.”
Holds almost always come from the opposition party, and with the financial reform bill being such a contentious issue, it’s not out of the question that a Republican could hold up Yellen’s confirmation as a negotiating ploy.
Legislation passed in the House last year authorizes the Government Accountability Office to audit the Fed. Sen. Jim Bunning, R-Ky., was among a bipartisan group of senators that supported such an amendment to the financial reform bill. Not only did that amendment not make it in to the current version of the bill, it would actually overturn the legislation passed by the House. Bunning is an influential member on the Senate Banking Committee, which handles Fed confirmation hearings, and has a recent history of filibustering to get something he wants. He may be someone to keep an eye on.
Assuming Yellen can sidestep the political minefield, her reputation, both personal and professional, is not expected to be an impediment to confirmation.
“She is very well-regarded,” said Adolfo Laurenti, deputy chief economist with Mesirow Financial Inc. in Chicago. “Also, a true economist other than Chairman Bernanke is missing [from the Board of Governors]. In that respect, she is a great addition because she really has the right profile as a macroeconomist.”
Before President Barack Obama nominated Bernanke for a second term as chairman last year, Yellen was pegged as a possible replacement. She’s a known commodity, having been on the Federal Open Market Committee, which oversees Federal Reserve balances available to banks, as well as interest rates. That serves her well, as does the fact that she’s known as someone who is proactive rather than reactive.
“She’s been a voice for the importance of the Federal Reserve’s dual mandate and for being far-sighted,” said Bradford DeLong, a colleague of Yellen’s in the economics department at the University of California-Berkeley. DeLong stressed that Yellen knows that, “when you’re making monetary policy now, what you’re really doing is you’re trying to think of what will be the state of the economy in 18 months? She’ll take the long view and I think that’s very important.”
Blinder said the busy schedule of the Senate Banking Committee could delay the process. The committee did not return calls for comment.