President Obama to Nominate Janet Yellen as First Female Chair of Federal Reserve

For the first time in United States history, a woman may lead the Federal Reserve. 

Economist Janet L. Yellen is President Obama's nominee to succeed Federal Reseve chairman, Ben S. Barnanke, at the end of January, The New York Times reports. In addition to being the first woman to head the Fed, she will also be the first Democrat to lead the organization in nearly three decades. 

Yellen, 67, is a professor at the University of California at Berkley and has been the central bank's vice chair since 2010.

Yellen and her husband, George A. Akerlof, also a U of C professor, developed a new theory of the labor market after paying their son's babysitter more than the going wage in the early 1980s. They found that the wage increase attracted a greater number of excellent babysitters. This lead to the development of their theory that employers who want to improve morale pay their workers more than the minimum wage, which can prevent some people from finding jobs. Hence, during periods of high unemployment, monetary stimulus can increase a demand for labor, which is the opposite of the classic view that the Fed cannot battle unemployment. 

This view has become a cornerstone of Yellen's economic beliefs. As the central bank's chair, Yellen has urged stronger measures to reduce unemployment. 

Democrats view her as the best person to support President Obama's stimulus campaign and strengthen financial regulation. Her confirmation would add to the Federal Reserve's evolution into an institution run by academics who are committed to growth and minimal unemployment, and not market-savvy bureaucrats. Senate Democrats thwarted the nomination of President Obama's first choice, Lawrence H. Summers. 

Yellen has expressed greater concern about the dire economic effects of unemployment coupled with a belief in the Fed's ability to stimulate job growth and prevent inflation to reduce unemployment. Her emphasis on lessening the scourge of unemployment has already inspired vocal dissent from Senate Republicans and investors who are worried that she may not try to safeguard against inflation. 

Yellen also appears to be more assertive than her predecessor, Mr. Bernanke. Yellen has been unafraid to tout her views. Bernanke has allowed Federal Reserve officials to be vocal about their opinions, whereas Yellen has voiced her concern that the clamor of opinions undermines the institution's effectiveness by confusing the direction of policies. 

"I think she is fundamentally committed to continuity, that we still have a problem and we still need monetary policy to be doing a fair amount," said Christina D. Romer, former chairwoman of Obama's Council of Economic Advisers and friend of Ms. Yellen. "There's a toughness there. And I think there's a toughness to her that there isn't in Bernanke."

Although she would be the first Democrat to head the central bank in almost three decades, her views are more closely aligned with the Obama administration than the left-leaning Democrats who avidly support her nomination. She believes that markets need significant regulation, but in the 1990s, she favored the growth of financial titans like Citigroup, and has not supported the breakup of such companies. 

If confirmed, Yellen will face the minority of Fed officials who want to draw back from the stimulus campaign. Richard W. Fisher, president of the Federal Reserve Bank of Dallas and future voting member of the Fed's policy-making committee, is one such official. Last week he said of Yellen, "She's wrong on policy, but she's a darn good, decent, wonderful person."

Yellen, who was born in Brooklyn in 1946, was drawn to economics due to an interest in the Great Depression, The New York Times reports. Economics allowed her to combine her love for math with a desire to have a positive influence on issues that affect people's lives. 

In high school, Yellen was a bit removed from the usual teen pastimes of music and parties, as well as the inchoate political unrest of the early 1960s. 

"She was a good friend and a good companion," said Charles Saydah, who was in many of Yellen's classes and hung out with the same group of friends, which he described as "the kids who were interested in folk songs." But "from where I was sitting," Saydah said, "it was clear that this was a way station to better things" for her.

At her high school, the editor of the student newspaper always interviewed the class valedictorian. Yellen was both, so she interviewed herself. She wrote, "I've decided to major in math or anthropology or economics or ..." She enrolled at Brown University, and quickly narrowed down her list of potential majors to one. 

"She took her first economics course and came home and gave me the one-hour lecture on why economics was the greatest thing going," said Susan Grosart, a childhood friend. "It was pretty obvious from then on that that was her passion."

Yellen later pursued a doctorate at Yale University after hearing a speech by James Tobin, an economist who believed that governmental policy could bring an economy out of a recession. 

According to the Times, Yellen met her husband, George, in 1977 while in a cafeteria at the Fed, where they both had taken research positions. 

"We liked each other immediately and decided to get married," Mr. Akerlof wrote in a personal history after winning the Nobel Prize in 2001. "Not only did our personalities mesh perfectly, but we have also always been in all but perfect agreement about macroeconomics. Our lone disagreement is that she is a bit more supportive of free trade than I."

Both believe in classic Keynesian economics: markets function imperfectly, and to resolve problems, the government must intervene. 

In 2012, Yellen gave a speech in New York saying that the Fed had not done enough to stimulate the economy after the 2008 recession. Yellen was trying to convince her colleagues, as she still does, that the Fed is capable of doing more.