A look at the public and private Yellen
WASHINGTON (AP) — Janet Yellen, the White House’s choice to lead the Federal Reserve starting next year, is known as a meticulous perfectionist, an unusually accurate prognosticator and a firm believer in the use of Fed policy to reduce unemployment.
She also owns a substantial stamp collection. She met her future husband in the Fed’s cafeteria. And in graduate school, she took such precise notes that they later became a textbook of sorts for future students.
Here’s a look at the public and private Yellen:
A SHARP FORECASTER
In the nearly 12 years that Yellen has expressed her views in statements and policy meetings and provided economic forecasts, she’s built an enviable batting average.
From the damage that a bursting housing bubble could cause the U.S. economy to the steps the Fed needed to take to fight the Great Recession, Yellen often saw more accurately into the future than many others. Transcripts of the Fed’s policy meetings document the trend.
One example: In December 2007, the Fed’s official forecast was for continued growth. Yellen was unconvinced. The transcripts show she pushed her colleagues to take unusually aggressive action against the threat of a downturn. She lost the argument. The Fed approved a small quarter-point cut in a key short-term interest rate rather than the bolder half-point cut Yellen favored.
“Any more bad news could put us over the edge, and the possibility of getting bad news — in particular, a significant credit crunch — seems far from remote,” Yellen argued.
December 2007, it later turned out, was the month when the Great Recession officially began. Less than a year later, the financial system was engulfed by its worst financial crisis in 70 years.
THE PRIVATE AND PUBLIC SIDE
Shy and quiet outside the classroom. Firm and direct when making a point in class.
That’s how former students and colleagues recall Professor Janet Yellen, who spent more than a quarter century teaching economics at the Haas School of Business at the University of California, Berkeley.
When Victor d’Allant took Yellen’s introduction to macroeconomics class in 1986, his first impression was of a “tiny” woman facing down a room of 125 opinionated students. Many were eager to challenge her on economic theory. Yet d’Allant recalls that Yellen would disarm her most forceful intellectual antagonists with confidence and the ability to reason.
“She was always very good about staying calm,” d’Allant said. “She said, ‘Let’s think about this carefully.’ That is an art that not so many professors have, not so many professionals have. To force this other person to go deeper into their thinking and understand the consequences of their thinking.”
FROM STAMPS TO STOCKS
Yellen and her husband, Nobel Prize-winning economist George Akerlof, have held a mix of big-company stocks and investment funds in a trust.
And they share a fondness for stamps.
The two held between $4 million and $13 million in assets as of Yellen’s financial disclosure report for 2012. Their stamp collection was valued at between $15,000 and $50,000
Their individual stock holdings included Conoco Phillips, DirecTV Group, E.I. DuPont, Pfizer, Office Max and Raytheon.
Through the University of California, they also hold retirement accounts in funds invested in bonds, stocks and insurance company contracts.
In addition, Yellen and Akerlof receive payments from a University of California pension, or defined benefit plan.
Last year, Yellen earned $179,700 from the Fed. As chairman, she would be paid $199,700, the same as for a Cabinet secretary.
AN ACADEMIC STAR
Yellen is familiar with success. Born in Brooklyn, New York, in 1946, she grew up with a father was a family doctor who worked from the ground floor of their home. Her mother was an elementary school teacher who quit work to take care of Janet and her older brother.
Yellen graduated as valedictorian from her public high school, then summa cum laude from Brown University with an economics degree in 1967. Four years later, she earned a Ph.D. from Yale University.
At Yale, Yellen became a legend of sorts. At least her class notes did. The Yellen Notes, as they became known, served as an unofficial textbook for generations of graduate students studying economics at Yale.
A mentor at Yale, the late Nobel laureate James Tobin, once said of Yellen, “She has a genius for expressing complicated arguments simply and clearly.”
LOVE IN THE CAFETERIA
Yellen not only found career satisfaction at the Fed. She also met her future husband in the cafeteria.
In 1977, she was a staff economist at the Fed in Washington and Akerlof was a visiting economist. After they married the following June, they began a long and highly successful partnership that produced numerous academic papers while both taught at Berkeley.
“We liked each other immediately and decided to get married,” Ackerlof wrote in essay published when he won the Nobel Prize in 2001. “Not only did our personalities mesh perfectly, but we have always been in all but perfect agreement about macroeconomics.”
Yellen revisited the Fed’s cafeteria when she returned to Washington as one of seven Fed board members in the 1990s. She took her lunches there as a way to subvert the hierarchical system that limited contact between top Fed officials and hundreds of staff economists.
“It was a real cultural shock,” remembers Kevin Hassett, a staff economist at the time. “There was a serious bureaucratic divide between the political appointees and the staff. She found a way around that.”
Yellen’s supporters say one of her main advantages over her chief rival for the Fed post, former Treasury Secretary Lawrence Summers, was this: She’s been able to build consensus among the seven Fed board members and 12 regional bank presidents who meet eight times a year to set interest-rate policies.
They note, for example, that Yellen moved the Fed, after years of discussion, to endorse a statement of inflation policy. In the statement, the Fed for the first time agreed in January 2012 to an inflation target of 2 percent
It was something Chairman Ben Bernanke had long advocated. But it had been resisted by other officials who feared setting too rigid a goal.
The statement was developed by a communication committee Yellen led. It gave equal weight to the Fed’s other mandate: to foster maximum employment.
Princeton economist Alan Blinder, a former Fed vice chair, said he was amazed that Yellen could forge such an agreement after years in which officials had debated the issues.
“It was a testament to her ability to listen to different points of view and arrive at a consensus,” Blinder said.
AP Business Writers Marcy Gordon and Michael Sandler contributed to this report.