With Federal Reserve Chairman Ben Bernanke’s term ending this January, Janet Yellen ’67, current vice chair of the Federal Reserve’s Board of Governors, is widely considered the frontrunner to fill his seat. Many Democratic politicians, including Elizabeth Warren, D-Mass., have encouraged President Obama to choose Yellen when he announces his nominee this fall.
Yellen’s name has gained more currency since former Secretary of the Treasury Larry Summers — widely seen as Yellen’s chief rival – withdrew from consideration for the position.
If named the Federal Reserve chair, Yellen would become both the first woman and the first Brown alum to hold the position.
A promising start
Yellen started her pursuit of economics at Brown in 1963, graduating summa cum laude in 1967.
“She was the star of the class,” said Jeff Koshel MA’67, who was a teaching assistant for one of Yellen’s economics classes.
Yellen demonstrated prescient analysis in her writing for the course, Koshel said.
“The argument (for one of her papers) is that if you had a currency area that would allow some country or geographic region to change its exchange rates, it could increase trade,” Koshel said. “At the time, I couldn’t quite get my head around it, but she wrote a very thoughtful, really theoretical paper, and 35 years later, everyone is talking about how if Greece had the ability to change its exchange rates, it could probably get out of its economic slump more easily than being tied to the Euro.”
Yellen always went a step beyond the required work, Koshel said, adding that she would complete all the required questions on exams and then would proceed to discuss several other topics in the area.
“It was kind of striking because it was something I never did on exams,” Koshel said. “I’d answer the question as best I could, but I never went beyond it. You really have to know a lot to put a question in context, and that’s what she did. I was always very impressed with her.”
When Yellen attended Pembroke College the University’s fledgling economics department had only eight people, said Jim Hanson, an economics professor at Brown in 1964. Both professors and students of the 1963-1967 economics department said they remembered Yellen’s accomplishments in the classroom and the diligence with which she approached her work.
“She was certainly the best undergraduate student I ever had,” said Hanson, who taught at Brown until 1980.
While at Brown, Yellen developed a “lifelong passion for economics in general and macroeconomics and international finance in particular,” she wrote in an email to The Herald.
Yellen credited University professors including Professor Emeritus of Economics George Borts and former professor Herschel Grossman for inspiring her as a student.
Borts “brought the department from a little local school place to the national level,” said Hanson, who taught international finance at Brown in 1964 while Borts was on sabbatical. Grossman died in 2004.
The University’s economics department has since become one of the top 20 economics departments in the country, according to a 2013 U.S. News and World Report ranking.
“I consider myself particularly fortunate to have had the chance not only to teach economics myself but also to apply some of the economics I learned (at Brown) in the real world of monetary policy, international finance and financial regulation,” Yellen wrote in an email to The Herald.
‘A remarkable career’
When Yellen was a student, Hanson said he and his colleagues encouraged Yellen to pursue macroeconomics at Yale — a path she followed, ultimately receiving her PhD in New Haven.
During her early career, Yellen taught at Harvard University and later became a professor emeritus at the University of California at Berkeley’s Haas School of Business.
Yellen’s professional path has included serving as chairwoman of President Bill Clinton’s Council of Economic Advisers, as president and chief executive officer of the Federal Reserve Bank of San Francisco and currently as vice chair of the Federal Reserve.
“She’s had a remarkable career, both establishing herself as a highly respected academic and then moving into policy circles,” said John Kwoka ’67, currently a profesor of economics at Northeastern University. “That’s not a transition everybody makes or makes successfully, but she certainly has.”
Yellen’s experience provides her with valued qualifications, both former colleagues and political commentators have said.
“Janet Yellen is a very capable, all around macroeconomist,” said President Christina Paxson. Yellen’s work has focused on issues of income inequality and she has shown that she is attuned to issues of income distribution and price incentives, Paxson said. “She has a good handle on the appropriate use of regulation to financial markets operating efficiently. She’s not left-wing or right-wing. She’s very centered in her approach, and I think that’s a good thing.”
Yellen has a documented ability to predict the direction of the economy — a crucial skill for the Federal Reserve chair position, Kwoka said. According to a July 2013 Wall Street Journal article that “examined more than 700 predictions made between 2009 and 2012 in speeches and congressional testimony by 14 Fed policy makers,” Yellen’s ability to forecast the direction of the economy was the most accurate overall.
“Yellen has the intellectual firepower, a deep understanding of the workings of the economy and an equally deep understanding of academic research on policy questions that the Fed has to implement,” Kwoka said. She also is independent from a “Wall Street that has steered us awry,” he said.
Changing it up
Summers’ decision to decline the potential nomination for Federal Reserve chair pushes the odds in Yellen’s favor, but President Obama may still decide on another candidate. National media sources including the New York Times and Wall Street Journal have reported Obama may be hesitant to capitulate to pressure by choosing Yellen.
In the past two months, Obama has also floated the name of former Fed vice chair Don Kohn as another contender, though his odds of being selected are generally considered slim.
Meanwhile, Yellen maintains high approval among economists at large, specifically with progressives and women’s groups.
Yellen also has the support of people closer to home.
“As president of Brown I would be thrilled to have a Brown alumna in that position, and as a woman economist I would be thrilled to have a woman in that job,” Paxson said. “It would all make me very happy.”