Robert C. Hockett, former Resident Consultant for the Federal Reserve Board, international finance expert and professor of Law at Cornell University, discusses how Janet Yellin will usher in a new era of a proactive Fed.
“Today marks a milestone at the Fed in at least two senses.
“The obvious milestone is, of course, the one that everyone is talking about: for the first time in its 100-year history, the most influential central bank in the world and the most consequential government agency in the nation – the US Federal Reserve Board – is to be chaired by a woman.
“The less obvious milestone, however, although unremarked, is actually much more important: Dr. Yellen is the first Fed Chair in modern memory who is on the record – and has indeed long been on the record – in maintaining that the central bank can and should spot asset price bubbles while they are in the making, and that it can and should act to pre-empt them.
“This vision – that of a 'proactive,' or 'macroprudential' Fed – might seem unsurprising to lay persons, but in fact it has been missing from mainstream central bank theory and practice for over 30 years. Chair Yellen has long seen that this was a mistake, and her now taking the reins at the Fed is significant above all on that account.”