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Yellen’s Fed Chief Appointment Critical to Central Bank’s Ongoing Independence

September 20th, 2013 | by Morris Beschloss | Comments

 

The U.S. financial markets breathed a comprehensive sight of relief this week at the anticipation of Fed Vice Chairperson Janet Yellen’s elevation to the top job in January. As has been trumpeted throughout the U.S. media, President Obama’s overwhelming choice was Larry Summers, who stage-managed the trillion dollar stimulus shortly after the president’s accession to the presidency early in 2009.

The opposition of five members on the Senate’s financial sub-committee would have made the President’s nomination an embarrassing rejection; this has made Yellen’s appointment almost certain, which will be greeted with further support by the investment community’s solid support, especially as the fiscal year-end showdown on multi-lateral issues approaches.

During the stormy events that transpired early on in the Obama presidency, Larry Summers, as chairman of the Council of Economic Advisors, stage-managed the Administration’s priorities, including the highly contentious Obamacare and the failed cap-and-trade legislation, which would have played havoc with the increasingly successful energy development that is underpinning the current recovery, such as it is.

Although Larry Summers, who served the Clinton Administration as Treasury Secretary, in addition to a short presidency of Harvard, etc., has had a wealth of experience, it is highly likely that the independence of America’s Central Bank to make decisions not in step with the President’s economic priorities would have been severely jeopardized. In effect, this would have given the White House clear sailing as far as the delicate balance between excess expenditures, deficit control, and the seemingly unstoppable runaway debt are concerned.

As much as can be determined from past experience, Ms. Yellen is cut from experiences similar to that of Chairman Ben Bernanke, who has had the courage to lead the Federal Reserve Board into decision-making that has kept the U.S. economy afloat, This has come even at the risk of furthering financial policies, such as quantitative easing that, at least, partially offset the festering unemployment, These have been worsened by severely restrictive financial regulations and Obamacare’s implementation, which have frustrated the bulk of small businesses.

Although Larry Summers has proven to be a talented economic analyst, his subservience to the two Presidents that he served seemed to indicate that these took precedence over what might best serve the country’s future economic salvation.

In Janet Yellen, the American nation would have an independent voice, whose Federal Reserve Board leadership would continue the imaginative and mandatory financial initiatives that Fed action has played in keeping America’s world-leading gross domestic product of goods and services on the plus side for now.

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