The favored parlor game of the political-economic complex right now is guessing who will replace Ben Bernanke as chairman of the Federal Reserve. The clear front-runner is Federal Reserve Vice Chairman Janet Yellen. But she’s by no means a sure thing.
The message isn’t always delivered in a whisper, of course. In May, Federal Reserve Bank of Dallas President Richard Fisher suggested on CNBC that if Yellen is chosen, the pick will have been “driven by gender.” That’s more of a shouting campaign.
Fisher hastened to add that Yellen is "extremely capable." But, he said, "there are other capable people." Capable people, I guess, who are male, and thus whose picks wouldn't be driven by gender.
But Fisher's comments aren't the sort that matter in this process. They're too crude. The significant doubts about Yellen are transmitted with more subtlety, and for months they’ve been coursing through the cloistered, close fraternity that will drive the selection of Bernanke’s successor.
In conversations with members of the Federal Reserve, the Obama administration, financial reporters and the broader monetary-policy community, I’ve had a surprising number of discussions that follow the same pattern: “Yellen is great,” my interlocutor will say. “But ... ”
The “but” is a variation on a theme. She lacks “toughness.” She’s short on “gravitas.” Too “soft-spoken” or “passive.” Some mused that she is not as aggressively brilliant or intellectually probing as other candidates -- though they hasten to say she’s clearly very knowledgeable about monetary policy. Others have wondered whether she could handle the inevitable fights with Congress.
Requests for specifics don’t yield much. It’s more a feeling. An intuition. A sense. But these airy hunches are held by powerful people who will be involved, formally and otherwise, in the selection of Bernanke’s replacement.
What the complaints share is an implicit definition of leadership based on stereotypically male qualities. They aren’t qualities that all men have, or all women lack, but they’re qualities that tend to be more rewarded in men than in women, and thus more prevalent among men than women. And because every chairman of the Federal Reserve (as well as every Treasury secretary) has been male, such qualities have steadily, perhaps subconsciously, informed the portrait etched in many minds of high-level economic policy makers.
This generic portrait survives in part because monetary economics remains a bit of a boys’ club. “In the general finance world, and even in economics, there are tons of women,” said Christina Romer, an economist at the University of California at Berkeley and former chairman of President Obama’s Council of Economic Advisers. “But I’m lucky at monetary-economics conferences if I’m one of three women, and now that Anna Schwartz has died, if I’m one of two.”
An interesting wrinkle is that the current chairman of the Federal Reserve doesn’t fit the default masculine leadership model himself. Bernanke is soft-spoken and conciliatory. He doesn’t pound the table in meetings or preen at conferences. When he took the job, there were concerns about his gravitas. He’s not a social or political force around Washington in the way his predecessor, Alan Greenspan, was. He leads by consensus, with none of the high-stakes showdowns that burnished the legend of former Fed chairman Paul Volcker. Yet Bernanke has managed to pull the Federal Reserve through an extraordinarily turbulent period.
Yellen’s background bears similarities to Bernanke’s, though she’s got more Washington and Fed experience than he did at the time of his appointment.
Before being named chairman, Bernanke spent three years on the Federal Reserve’s Board of Governors and a bit less than one year leading President George W. Bush’s Council of Economic Advisers. Yellen led the Council of Economic Advisers for almost two years under President Bill Clinton, then was president of the Federal Reserve Bank of San Francisco for six years. She has been vice chairman of the Federal Reserve since 2010. “She’s been almost groomed for this job,” said Tony Fratto, a partner at Hamilton Place Strategies LLC.
Bernanke’s performance drives home the core problem with criticisms of Yellen: The qualities she supposedly lacks don’t necessarily have much to do with running the Federal Reserve. An aggressive chairman can alienate members of the Fed’s powerful Open Market Committee. A chairman too convinced of her brilliance or too forceful in suppressing dissenting voices can miss developments that don’t conform to her model -- a problem that bedeviled the end of Greenspan’s term. As for gravitas, well, that comes from a job well done. If you do the job poorly, no amount of silver hair will save you.
In the end, what matters is that the Fed chairman gets the big monetary calls right and is able to convince the rest of the Open Market Committee to go along. Yellen has gotten a lot of big calls right.
If you go back to its December 2007 transcripts -- the most recent we have -- you’ll find the Federal Reserve predicting that the economy would avoid recession. William Dudley, now the chairman of the Federal Reserve Bank of New York, said that “fear is diminishing, which implies less risk of a crisis developing from this source” -- “this source” meaning the bunk mortgages that would imperil Wall Street and the world a year later.
You’ll also find Yellen voicing a prescient note of pessimism. “The possibilities of a credit crunch developing and of the economy slipping into a recession seem all too real,” she warned. In ensuing years, Yellen pushed for the Federal Reserve to do more to combat unemployment -- advice that Bernanke and the rest of the FOMC eventually followed.
There are real reasons to oppose Yellen’s candidacy. She’s dovish on inflation, which won’t please hawks. Relatedly, she’s focused on unemployment, which may unnerve some who think the next chairman should focus on rapid “tapering” -- bringing the Fed’s asset purchases to a gradual close. You can argue that Yellen's approach was right for 2010, but appointing her in 2013 is fighting the last war.
But given the importance of the post, the arguments against her ought to be made out loud, and based on something more than a male-coded template of what leadership used to look like.