Janet Yellen is arguably the most powerful woman in the history of the United States.
Yellen was recently approved by the U.S. Senate to be the first female chair of the Federal Reserve Board.
Federal Reserve chairs, who are appointed by the President but operate independently from the White House, matter. Like her predecessors Alan Greenspan and Ben Bernanke before her, the Fed chair can singlehandedly move the U.S. stock markets with simple hints about what she might do next.
So, what will Yellen do next?
Here’s a hint…When asked by Time magazine about what powers an economy, Yellen replied, “Economic stimulus comes through higher house and stock prices, which causes people with homes and stocks to spend more, which causes jobs to be created throughout the economy and income to go up throughout the economy.”
In other words, Yellen will have a focus on the demand side of the economy, a departure from the camp that has traditionally focused on supply side, “trickle down” economics. This change to a more Keynesian approach to the economy is coming at a time when the gap between the 1 percent of the wealthiest and the poor is wider than at any time since the Great Depression.
Wisconsin bankers are guardedly optimistic that Yellen will be up to the task. In private conversations with BizTimes, several bankers have acknowledged a desire for some increases in interest rates, which have been artificially repressed by the Fed, putting stress on banks’ balance sheets.
Rose Oswald Poels, president and chief executive officer of the Wisconsin Bankers Association, said, “The Wisconsin Bankers Association believes the transition from previous Fed President Ben Bernanke to Janet Yellen will be a relatively smooth one. This has been borne out by the lack of dramatic fluctuations in the market since her official appointment. She is known to follow many of the philosophies and policies of her predecessor. To the extent that it can, this makes Yellen a known quantity which adds needed certainty to both the markets and to what Wisconsin bankers can expect. It is expected that she will encourage policies that continue the prolonged low interest rate environment we’ve endured for the past few years. This is concerning because it, in turn, puts undue pressure on the industry’s earnings. Banks of all sizes are experiencing lower net interest margins and this pressure will only grow as interest rates remain artificially low. As the Federal Reserve heightens its focus on bank regulation, Yellen’s experience supervising banks in the Federal Reserve system provides her with a valuable and much needed perspective. Janet Yellen is certainly qualified to step into her new role. WBA will continue its proactive outreach to the Federal Reserve on the issues that affect the banking industry and the communities they serve.”
Daryll Lund, president and chief executive officer of the Community Bankers of Wisconsin, said, “CBW congratulates Dr. Yellen on her confirmation. As we have seen these past few years, the Federal Reserve plays a critical role in the health of our economy. While community banks’ share of financial industry assets is about 14 percent, they provide almost half of all loans to small businesses that employ 48 million Americans. Because small businesses, in partnership with their community bank lenders, help drive our nation’s economy, it is imperative that the Federal Reserve take into consideration this important segment of the financial services industry when setting monetary policy.”