Obama to tap Yellen as Fed vice-chairman

By Alan Rappeport in New York and Tom Braithwaite in Washington
Published: March 12 2010 16:08 | Last updated: March 12 2010 16:08

The Obama administration is set to nominate Janet Yellen, president of the Federal Reserve Bank of San Francisco, as vice chairman of the central bank, according to a person familiar with the selection process.

The move would fill one of three vacancies at the Fed and represents a “dovish” selection by President Barack Obama. Ms Yellen, who has been a strong supporter of Fed chairman Ben Bernanke’s near-zero interest rate policies, replaces Don Kohn, who announced earlier this month that he would retire as of June.

Ms Yellen, who is also an economics professor at the University of California, Berkeley, is Mr Obama’s top pick but the vetting process is ongoing and she has not been officially nominated.

She served from 1994 to 1997 as a member of the Fed’s board of governors and in 1999 was chair of President Bill Clinton’s Council of Economic Advisers. Ms Yellen took the helm of the San Francisco bank in 1994.

The resignation of Mr Kohn, a 40-year veteran of the central bank, represented a challenge to the Obama administration, which has moved carefully in shaping the Federal Reserve at a time when the economy remains fragile. Other candidates widely speculated to replace him included Obama economic advisers Christina Romer, Austan Goolsbee or Larry Summers.

Since taking office Mr Obama’s has selected Dan Tarullo as a new Fed governor and reappointed Mr Bernanke, who faced a tough confirmation battle.

Ms Yellen, who holds a PhD in economics from Yale and is married to Nobel Prize winning economist George Akerlof, has written widely on income inequality, trade liberalisation and the goals of monetary policy.

In a speech last month in San Diego, Ms Yellen warned that a “V” shaped economic recovery might not be in the cards because the fourth-quarter surge in economic output overstated the economy’s momentum.

“The bottom line is that we are already unwinding the emergency programs we set up during the financial crisis,” Ms Yellen said. “When the day comes to start raising rates again, we have tools at the ready.”

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