Janet L. Yellen
Since 2010, Janet L. Yellen has been the Fed's vice chair, and she previously was president of the Federal Reserve Bank of San Francisco. (Brendan Smialowski, AFPGetty Images / December 13, 2013)
January 6, 2014, 4:31 p.m.
WASHINGTON — Janet L. Yellen won confirmation to be the first female chief of the 100-year-old Federal Reserve, though her margin of support underscored just how polarizing the once low-profile central bank has become since the financial crisis.
On a day when unusually frigid weather nationwide kept some lawmakers stuck in their states, the Senate voted 56-26 Monday evening to approve the former UC Berkeley economist to succeed Ben S. Bernanke on Feb. 1.
In all, 45 Democrats and 11 Republicans voted for her confirmation and 26 GOP lawmakers voted against, making the overall 68% margin of confirmation the closest ever for a Fed leader.
Before the financial crisis sent the recession deeper in late 2008 and left the Fed to pull out extraordinary measures to try to spark a faster recovery, the confirmation process usually produced little or no opposition.
For many GOP senators, their "no" votes were as much against the aggressive policies and direction of the central bank to boost the economy than against the 67-year-old Yellen, said Chris Krueger, a senior policy analyst at financial services firm Guggenheim Partners in Washington.
"Being anti-Fed in a lot of congressional districts is just good politics," he said.
Krueger called the Fed the "monetary version of the Supreme Court," which in recent decades has seen once routine confirmations turn into bruising political battles.
Yellen, the first Democrat to win confirmation since Paul Volcker in 1983, has been a strong supporter and confidante of Bernanke in championing the so-called easy-money policies the Fed has used to fight high unemployment. That has earned both Yellen and Bernanke the wrath of conservative Republicans.
The final vote tally, however, has little practical significance on financial markets or the Fed's policymaking and ability to operate independently, economists said.
"It's been known for quite a while that Yellen was going to be the new Fed chair," said Joshua Feinman, chief global economist at Deutsche Asset & Wealth Management in New York. "Her views are very well known. She's been at the center of what the Fed has done now for a number of years, and it would be hard to imagine a more seamless transition going from Bernanke to Yellen."
Democratic leaders noted the historic nature of Yellen's nomination and praised the Brooklyn native for her deep knowledge and experience. Since 2010, she has been the Fed's vice chair and previously was president of the Federal Reserve Bank of San Francisco. She also served as chair of the White House Council of Economic Advisers in the Clinton administration.
"She has proven through her extensive and impressive record in public service and academia that she is most qualified to be the next chair," said Senate Banking Committee Chairman Timothy Johnson (D-S.D.). "Americans should feel reassured that we will have her at the helm of the Fed as our nation continues to recover from the Great Recession."
Even so, most Republicans and Fed critics used the occasion to voice their displeasure at the institution's policies.
The conservative group Heritage Action for America called on senators to oppose her confirmation and said it would include the vote in its annual legislative score card of key congressional decisions.
"Her historically weak support highlights the growing concern over the Federal Reserve's expanded authority and aggressive use of monetary policy," the group said.
But Yellen's confirmation margin has no direct effect on her job because the Fed is an independent agency, noted Allan H. Meltzer, a professor at Carnegie Mellon University and author of "A History of the Federal Reserve."
Neither Congress nor the White House controls its budget, which comes from the central bank's own operations.
Still, the vote shows how unpopular the Fed has become to some lawmakers, who could try to capitalize on that to pass legislation that would change how the Fed operates.
Sen. Rand Paul (R-Ky.), son of former Rep. Ron Paul, a longtime Fed critic, is pushing legislation to expand the Government Accountability Office's audits of the central bank to include its monetary policy actions and decision making. Yellen and Bernanke opposed the legislation.
In addition, the House Financial Services Committee plans to hold what it called "an aggressive series of hearings" this year to develop legislation "to reform how the nation's central bank operates."
Guggenheim's Krueger said the so-called Audit the Fed legislation has little chance of being enacted while President Obama is in office. And he said the House hearings probably will be just "a nuisance and irritation" to Yellen.
Yellen could face a tougher challenge inside the central bank as two regional Fed presidents known to be more critical of easy-money policies become voting members of the policymaking board this year.
And if economic growth picks up this year, as many have forecast, that could put greater pressure on Yellen to pull back more rapidly on the Fed's signature bond-buying stimulus program.
At the same time, analysts said, an improving economy would help Yellen by likely quieting her critics. The smallest previous confirmation margin for a Fed leader was four years ago when the Senate voted 70 to 30 for Bernanke — or 70% support — to a second four-year term amid intense criticism of the central bank's policies.
Despite being a Republican originally nominated to lead the Fed by President George W. Bush, Bernanke was opposed for a second term by 18 GOP senators in 2010. They complained the Fed had overstepped its bounds in taking aggressive actions during the financial crisis and was risking runaway inflation with easy-money policies designed to stimulate the sagging economy.
Bernanke also was opposed by 12 Democrats and one independent, liberal Vermont Sen. Bernie Sanders. They argued Bernanke and the Fed were concerned about helping Wall Street more than average Americans.
Yellen has much more support among Democrats than Bernanke did four years ago, including many liberals who actively lobbied for Obama to nominate her over former Treasury Secretary Lawrence H. Summers.
But she has less support among Republicans, many of whom have become increasingly frustrated by Fed stimulus policies that have swelled the central bank's balance sheet to about $4 trillion.
The Fed decided in December to start scaling back a key stimulus program — its monthly purchase of $85 billion in bonds — but it is still purchasing $75 billion a month to try to boost growth and lower unemployment.
In contrast to the bitter fights over confirmations, Bernanke was confirmed for his first term in 2006 by a voice vote, which generally indicates little or no opposition.
Before 2010, the closest confirmation vote for a Fed chairman was 84-16 in 1983 when Volcker was confirmed for a second term amid anger over high interest rates he engineered to fight inflation.