Janet Yellen: 'We only thought of her as someone's wife'

Janet Yellen: 'We only thought of her as someone's wife', When Janet Yellen was a lecturer at London School of Economics, she was regarded mostly as her husband’s sidekick.

It was the late seventies and the university had brought her on as part of a package deal to help secure George Ackerlof, the heavyweight intellectual who went on to win the Nobel Prize for economics in 2001. The pair had just married after meeting in the cafeteria of the US Federal Reserve.

“She was very undervalued at that time, because we only thought of her as someone’s wife,” said Lord Meghnad Desai, who worked alongside Ms Yellen at the LSE. “I found her very serious and a very bright person. She was solid, theoretical, in the mainstream – not flashy but very good. I could see that she felt she was not getting her due.”

Ms Yellen (shown in earlier days left) stepped firmly out from her husband’s shadow some decades ago, but her status as one of the world’s leading economic thinkers was underscored on Wednesday when President Obama nominated her as the new chairman of the US Federal Reserve.

She will succeed Ben Bernanke to become first woman at the helm of the world’s largest central bank, following an unusually long and public leadership battle with Larry Summers, the former US Treasury Secretary. President Obama was understood to favour of Mr Summers, until widespread opposition prompted him to drop out of the race last month.

Although Yellen’s nominations was expected, its confirmation has acted as a much-needed salve on US markets. The 67-year old former Brown graduate has been the Fed’s deputy chairman since 2010, and is likely to adhere largely to the course already set, in which she played a large hand.

At the start of their academic careers, Yellen and her husband developed a theory of the labour markets, inspired by their own willingness to pay above the odds for childcare in order to secure better quality of service today.
That work has helped to shape much of the Fed’s current policy, which recognises the impact of unemployment on confidence – both amongst the population at large and in individuals affected.

These are not just statistics to me,” Yellen told a conference in February. “We know that long-term unemployment is devastating to workers and their families.”

The daughter of a teacher and a doctor, Yellen initially studied economics because she saw it as a path to public service – a subject which could yoke her love of mathematics with a desire to change people’s lives.
One of her great intellectual heroes was the economist James Tobin, who believed that government intervention can lift an economy out of recession, and who – in Yellen’s view – injected a dose of humanity into what could sometimes seem a cold discipline.

After his death in 2002, she told a Yale newspaper: “He encouraged his students to…work that would not only meet a high intellectual standard, but would improve the well-being of mankind.”

The Fed has said it will keep fiscal stimulus measures in place until America’s labour market shows signs of sustained improvement, and that even then, it will only start tapering its $85bn-a-month bond-buying scheme gradually, over six to eight months.

Yellen, who has been one of the most vocal advocates of artificial stimulus, could wind back America’s quantitative easing programme even more slowly than that.

Economists, who had expected tapering to start this month, are pushing their estimates out as late as March.
It is not a solo decision of course - Fed policy is put to a vote by its 12 members. But Yellen is one of the more vocal members of the group. Although she favours a consensus, she is expected to be more assertive about her own opinions than her predecessor was.

Investors and economists hope that this will come hand in hand with another significant departure in style. They are looking to Ms Yellen to sharpen up the Fed’s communication skills, following a particularly volatile summer of trading, during which Mr Bernanke’s mixed signals left investors poring over every shred of new data to try and second-guess the Fed’s next move.

“She is likely to be more upfront about her own views, to be less of a consensus seeker at all costs, to defer less to the [committee] consensus, and to produce clearer communication as a result,” said Roberto Perli, head of global monetary policy at Cornerstone Macro, a Washington research firm.
Investors may take solace from Yellen’s single-mindedness, as well as her reputation for clarity. The notes she took as a university student were so clear, they are reportedly still used as a resource for undergraduates today.