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Janet Yellen Helped Steer An Economy In Crisis To Stability

Feb 3, 2018
Originally published on February 3, 2018 8:18 pm
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MICHEL MARTIN, HOST:

The head of the U.S. banking system who helped right the economy coming out of the financial crisis steps aside today. Janet Yellen served four years as chair of the Federal Reserve. She was an appointee of President Obama. She's the first woman to hold that position, but she was not reappointed to serve another term. President Trump appointed Jerome Powell to take Yellen's place. We wanted to look back on Yellen's career, so we called Rana Foroohar. She is a columnist at The Financial Times, and she was kind enough to join us from New York. Rana, thanks so much for speaking with us.

RANA FOROOHAR: Hey. Thanks for having me.

MARTIN: So let's start with the basics. What does the head of the Federal Reserve do?

FOROOHAR: Well, the Federal Reserve is the country's central banker, which means that it controls the money supply in America. It controls where interest rates are set, which has a big impact, of course, on everything from your home mortgage to what you might be paying on your auto loans or any other kind of loans you might have outstanding. And it's also the regulator in chief of the financial sector. The Fed regulates other banks in America.

MARTIN: So tell us about the scene she inherited when she moved from being vice chair of the Fed to becoming Fed chair.

FOROOHAR: She inherited what might have been one of the most tricky economic situations in Fed history. You know, we weren't in the middle of the financial crisis at that point, but the Federal Reserve had, in the previous few years, dumped an unprecedented amount of money into the economy - $4 trillion in all since the financial crisis - to try and get the economy going. And it was Janet Yellen's job to keep that process steady and then eventually start to turn the taps of that easy money off.

Now, why is that such a hard thing? Because financial markets loved all that money, but when you start to turn the taps off, you tend to get volatility. You can get stock crashes. You could potentially get another recession if you do things wrong. So she inherited a really, really tricky job.

MARTIN: You wrote that back in 2014, when she first came into office, that she focused on the human impact of economics, and that she really wanted to be sure that policy helped ordinary households. How did we see that play out in economic policy?

FOROOHAR: Yeah, absolutely. It was such a diametric shift. Fed chairs usually come in and they care a lot about Wall Street, and they typically come from Wall Street - Janet Yellen did not. She grew up in Red Hook, Brooklyn. Her father was a family physician who used to treat dockworkers. And coming into the position after the financial crisis, she thought a lot about what was going to help ordinary workers as opposed to Wall Street.

MARTIN: What do you think she'll be known for? I mean, when this chapter of the Fed's history is written, how do you think she'll be described?

FOROOHAR: Well, it's interesting. I think that she'll be described as absolutely a safe pair of hands, someone that gave us security and stability at a time when the economy really needed it. There is one interesting juxtaposition though. You know, I mentioned earlier that she cares very much about working people, and having interviewed her personally a number of times, I know that to be the case.

At the same time, the policy of keeping interest rates low, which was designed to create pressure at the bottom end of the job market and help people, you know, making $15 an hour, maybe help the employment in that part of the job market, it also created, ironically, wealth inequality. Because when interest rates are low, asset prices like stocks and bonds and so forth go up in value, and so that actually created inequality. And that's something that we're all having to struggle with now, today, in our economy. And it's going to be a big question as to how to handle this for the Fed going forward.

MARTIN: That's Rana Foroohar. She's a columnist and an associate editor for The Financial Times. She was kind enough to join us from the studios at the Financial Times in New York. Rana Foroohar, thanks so much for speaking with us.

FOROOHAR: Thank you for having me. Transcript provided by NPR, Copyright NPR.