Is Janet Yellen the Federal Reserve's 'fall gal'?

Janet Yellen with her name sign

A Canadian was appointed to run the Bank of England. A woman, Janet Yellen, will be appointed to run the more powerful US Federal Reserve, if President Obama's wish isn't blocked by Congress. Diversity rules in central banking?

About time you might say.

Central banking has been more dominated by white men in suits than any other occupation I can think of. The hegemony of the Y chromosome in monetary policy is greater even than its hold on big business or big politics.

For years I have struggled to understand why this is. What is it about the arcana of the money transmission mechanism that repel women just as they approach the secret chamber where they would have the power to expand or shrink the supply of money?

The men of the Bank of England, showing less than magnificent imagination, always put it down to women going off to have babies just when they're beginning to learn the game, and - a bit of useful self insight here - the Bank being lousy at helping them to reintegrate when they're ready to return.

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It is not quite like having a woman in charge of the Vatican, but it's not far off”

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For what it's worth, the Bank seems to be mending its ways a bit. It invented the post of chief operating office, and appointed Charlotte Hogg as first incumbent.

And Jenny Scott, late of the BBC where she was in charge of comms, is back as an executive director and adviser to the governor on a part-time basis, now that her children are a bit older.

So that is two women out of 16 at the Bank of England's executive top table, which is a 100% increase on recent history and an increase of infinity over tradition (and I am not counting the vacant post of human resources director).

"Well done chaps," you might say. But you might not say "carry on" if you note that the glamorous jobs of governor, deputy governor for monetary policy, deputy governor for financial stability and deputy governor for prudential regulation - the policy making jobs - are all still filled by blokes.

Russia's Elvira Nabiullina Russia's new central bank chief Elvira Nabiullina

But what on earth could be more glamorous than being chairman of the Federal Reserve. I don't want to be accused of overstating it, but the appointment of Janet Yellen feels like quite a big deal.

It is not quite like having a woman in charge of the Vatican, but it's not far off.

So we've talked about the apparent lack of equal opportunities in the stewardship of our money. What about ideological and intellectual diversity?

Well, for the next year or so at least, Yellen would represent continuity in a policy sense.

She was an architect and supporter of the plan to create $85bn of new money a month to keep interest rates as low as possible in the hope of bringing down unemployment.

So there'll be no charge back to tight-money, anti-inflationary zeal on her watch - or at least not until the risks of self-reinforcing price rises are impossible to ignore.

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It looks like US addiction to cheap money will be fed for some time yet”

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And here is where you have to worry that she's being lined up as the "fall gal" (I don't think that's a sexist descriptor, but I am counting on you to put me right).

Because phasing out the extraordinary, exceptional attempts to reduce the cost of money - the hallmark of the central banks of the major rich economies since the crash of 2008 - is fraught with dangers.

Just the hint that the Federal Reserve would reduce that $85bn a month of money creation via bond purchases has pushed up important US and overseas interest rates and caused turmoil on currency markets.

If that is the impact of just the possibility of a slight turning down of the money faucet, what kind of market reaction is likely as and when the valve is tightened?

Maybe with investors' expectations ahead of events, it will be a non-event. But the current Fed chair Ben Bernanke and his colleagues, bar one (who wasn't Ms Yellen), haven't been ready to bet on that.

They worry that interest rates will overshoot in an upward direction, and choke off America's fledgling recovery.

And another thing.

Federal workers protest against the shutdown Federal workers have been sent home in the shutdown

Ms Yellen would be picking up the pieces of the current inability of Congress to agree a new budget.

With no end in sight to the partial shutdown of the US Federal government, and fears rising of that most momentous of accidents, a default by the United States (see Onset of the storm), at best she'll inherit an economy weaker than she would have hoped just a couple of weeks ago. At worst she'll be cleaning up a financial crisis not too different from the 2008 debacle.

Which means, as minimum, extraordinary money manufacturing would persist for longer.

Just to state the most basic challenge for her, the longer the US and global economy is hooked on massive money creation by the Fed, the harder will be the cold turkey, as and when it comes.

And, to repeat the bloomin' obvious, because of the budget impasse, it looks like US addiction to cheap money will be fed for some time yet.

Or to put it another way, if Congress ratifies her appointment, Ms Yellen will have to make history in a bigger sense than simply being the first woman to be seen as the most powerful financial player in the world. She'll also have to navigate all of us (and I mean all of us) through some of the most treacherous economic rocks we're ever likely to encounter.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • Comment number 107.

    This comment was removed because the moderators found it broke the house rules. Explain.

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    Comment number 106.

    "What about ideological and intellectual diversity?" Are we really ready for an IQ of 65 or less in this type of job. 66 has been bad enough!

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    Comment number 105.

    @104 To be clear, the 'glass cliff' refers only to the context in which women are *appointed* to leadership positions, it is not about the quality of their leadership once in those positions -- other than to observe that they face tougher-than-normal challenges and are subjected to greater-than-normal scrutiny.

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    Comment number 104.

    @102 (Alex Haslam): the article you've pulled up from 2004 draws attention to Kate Swan, shortly after her appointment as CEO of WH Smith. For the benefit of the general reader: Kate Swan subsequently did a FANTASTIC job at WH Smith and is one of the most respected CEOs in the City irrespective of her sex. "Glass cliff" seems only to get applied for the benefit of less successful women.

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    Comment number 103.

    Janet Yellen is overrated by the establishment in government,financial and academic circles. I urge the US Senate to reject her nomination. The President should choose an outsider instead. The Federal Reserve System needs major overhaul after 100 years. Its powers must be reduced drastically. Low inflation erodes buying power of average consumers. 0% should be our objective.Deflation is a myth!

  • rate this

    Comment number 102.

    It is hard to imagine anyone who could be more qualified for this position. Yellen is an economist of the highest calibre, with bucket loads of relevant experience.

    However, to get some context for the thrust of this particular story, it is worth entering "glass cliff" into a search engine, or simply reading this earlier BBC New story:

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    Comment number 101.

    It would be immensely patronising to wait until a "benign" period for monetary policy before appointing a woman to the job.

    Yellen has been appointed on merit, as she should be. It may be tough luck that she's the best candidate at a delicate time, but to suggest that she is some kind of stooge or fall guy purely because of her gender... I'm sure she's handled dafter sexism in her life.

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    Comment number 100.

    " Is Janet Yellen the Federal Reserve's 'fall gal'? "

    Not really very funny - especially since the American use of 'Guy' is often applied to both men and women ...

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    Comment number 99.

    She'll be readily endorsed by the Senate (the House gets no say on this), and sounds like she has a real challenge ahead. Clearly an experienced and qualified candidate, although 8 years older than Bernanke, which seems a bit odd. Also continues the Fed tradition of Jewish chairpersons, following Ben and Greenspan. She'll need to be very good, and suspect she will be.

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    Comment number 98.

    Presumably for Congress to ratify her appointment it would first be necessary for them to end the shutdown and get back to work. If they don't sort themselves out and the US defaults that may never happen.

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    Comment number 97.

    first rule of management , always have another person around you that can take the blame when you screw up ! Its called survival and the young managers these days are very good at it, accept the accolade when things go well & delegate failure when they don`t.
    I have seen so many managers do this its called abdicating responsibility they call it empowerment LOL !

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    Comment number 96.

    Yeah, women in top central banking jobs is completely unheard of, Peston.

    By the way, the IMF is run by Christine Lagarde. shhhhh.

    Sex equality news stories should be consigned to history. Its not exciting or unusual that Yellen is a woman. Its just sad and desperate that you have nothing better to write about.

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    Comment number 95.

    Mr Peston. Why are you such a boring journalist? You do send me to sleep every time I see you on TV. Sorry, my comment isn't very constructive - but please, please, go and work in a fast food joint or something and leave serious journalism to people who have a personality. thank you

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    Comment number 94.

    Can't believe all the positive comments on Yellen's appointment.

    She's simply another Keynesian money-printing loon whose actions will simply serve to further destroy the savings of hard-working people the world over and exacerbate the wealth inequality gap.

    Bring back 'sound money' before the money printers grind us all into dust.

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    Comment number 93.

    Bravo, RP for including the word "hope" when talking about QE bringing down unemployment. Most Keynesian economists believe that QE is akin to holy water in that regard.

    Boo, for suggesting Ms Yellen may actually be capable of "navigating" us all to calmer economic waters. Central bankers may influence a key component of the economy but it is just one component in a vastly complex machinery.

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    Comment number 92.

    Now for the final big hurdle, finding a few politicians at work to endorse her appointment.

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    Comment number 91.

    Facing all those chellenges, the US and the world is fortunate that the Fed is going to be led by a person as competent as Janet Yellen. Both in her academic career and her time at the Fed she has demonstrated an exceptionally well-balanced and well-grounded mastery of all the ramifications of macroeconomic and monetary policy.

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    Comment number 90.

    I poked fun a time back at... rehyping.

    Someone just woke up, ~ Many market-watching prognosticators have dismissed the spike in T-Bill rates on the basis of "well it's only a few pennies, why worry..." missing entirely the 50-100x leverage in TRS and the almost inifinite rehypothecation risk implicit in a missed payment (even if temporary)

    Treasuries are.... now, let me see.


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    Comment number 89.

    She can't lose really. If things go wrong, it will be blamed on the folks in Congress, who currently have (deservedly) opinion poll ratings rather lower than a homicidal skunk with terminal hallitosis.

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    Comment number 88.

    Central bankers are all part of Capitalism. Central obviously.
    And the Fed is smack bang in the middle.
    Since the $ is the reserve currency at the moment.
    And yet how many people realize the importance?

    The true importance.
    You see there is the 4th estate forming public opinion.

    So who is it actually pulling the strings?
    And then on the side lines there is the Tea Party.

    All in charge of us....


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