Empathy Economics by Owen Ullmann

Author:Owen Ullmann [Ullmann, Owen]
Language: eng
Format: epub
Publisher: PublicAffairs
Published: 2022-09-27T00:00:00+00:00

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CLIMBING THE FED LADDER

“The next financial crisis will be something completely different”

When Fed Board of Governors vice chair Donald Kohn decided to retire in the spring of 2010, Janet Yellen immediately surfaced as the consensus candidate among President Obama’s top economic advisers. National Economic Council director Lawrence Summers; Treasury secretary Timothy Geithner; and Christina Romer, chair of the Council of Economic Advisers, all knew Yellen well and were high on her based on both her skill set and her personality.

Geithner, who had left his job as New York Fed president the year before, was tasked with putting together a list of candidates to replace Kohn. “The choice was obvious,” he said. “It was easy, obvious, and sensible to choose Janet.” Kohn agreed: “My recollection is that there was a very strong consensus among the decision-makers that she would be the most obvious and best choice to replace me. She was highly respected as an economist and liked as a person. She had the experience on the Board of Governors. She had experience at the reserve bank, so she was part of the FOMC. She was completely geared up. It would be a seamless transfer.”

Christina Romer was a close friend of Yellen’s from when they both taught at Berkeley, and she was among the group of relatives and friends invited to travel to Sweden when George Akerlof received his Nobel award. Romer called Yellen to sound her out. Rahm Emanuel, the White House chief of staff, called to offer the job and Yellen accepted.

The new job came with a financial penalty, however. Yellen was the highest paid person in the Federal Reserve System, making about $400,000. The vice chair made less than half that, but money wasn’t an issue since Akerlof could retire at full salary and had been offered a visiting scholar position in Washington. Son Robby was off teaching in England. So, the move back to the nation’s capital made sense. Yellen and Akerlof kept their Berkeley home and rented one in Washington, assuming they would be there only a few years. Neither suspected at the time that it would be a permanent move.

John Williams was surprised Yellen would give up her job at the San Francisco Fed, which he would inherit. She had influence, respect, good pay, and a pleasant personal life. When he questioned her about that, she responded, “This is where I’m needed. The president is asking me to play an important role in an important time, and it’s hard to say ‘no’ when you’re being asked to do something important and you’re being trusted to do that.’”

Robby, who received his PhD from Harvard and became an economist and academic like his parents, said his mother’s decision set her on a historic course as an economic policymaker, though that was not foremost in her mind at the time. “We might’ve had a word about her eventually becoming Fed chair, but her reaction was, ‘Of course not.’ She just didn’t think such a thing would happen,” he said.

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