Janet Yellen went to Capitol Hill to be inter rogated by some senators about the kind of job she plans to do once she's confirmed as Chair of the Federal Reserve.
Many politicians expect little from the Fed because they think it has less power and flexibility than it does. For its part, the right thinks it has exercised more power than it has. Yellen won't transform anybody's view of the Fed, but at least she has a sense of the gravity of our ongoing economic situation.
Too bad the same can't be said for some of the senators who interrogated her today.
Ranking Republican Sen. Mike Crapo set the tone for his party in his opening statements by complaining about the Fed's "unprecedented policies" in response to the ongoing economic crisis -- without ever discussing the crisis itself. That crisis was, and still is, unprecedented in modern history.
Crapo pressed the nominee on "normalization." He didn't use the phrase to refer to a "return to normal employment levels," but rather to ask when the Fed would end its efforts to repair the economy. He also asked Yellen how she would "fix" Dodd/Frank, by which he presumably wanted to know how she would remove some of its regulatory safeguards, and complained about stimulus spending (which is outside the Fed's authority).
Sen. Richard Shelby complained at length about the stimulus, and rather gratuitously complained that "quantitative easing" was a made-up phrase. That may have been the silliest moment of the entire hearing, since all economic terms are made-up phrases. (But none are more made-up or fantastic than "trickle down" and "supply side.")
Sen. Bob Corker suggested that quantitative easing is nothing more than a way for bankers to make easy money, which of course it is (although Yellen noted that it also made life easier for middle-class homeowners). But Corker never offered any constructive solutions to our ongoing economic problems -- and as far as this writer knows, he never has.
Sen. Pat Toomey also joined the chorus, fretting about savings accounts for middle class households (most of whom have more immediate problems and beating up Yellen and the Federal Reserve for an economic situation that's in large part the result of GOP inaction and obstructionism.
The Other Side
Those were the Republicans. What about the Democrats? In his (considerably briefer) opening statement, committee chair Sen. Tim Johnson pointed out that Ms. Yellen "has devoted a large portion of her professional and academic career to studying the labor market, unemployment, monetary policy, and the economy." He also noted she was "the first Fed official, in 2005, to describe the rise in housing prices as a bubble that might damage the economy."
In other words, Johnson had a firmer grasp on reality than his GOP counterpart.
Sen. Jon Tester noted a lack of transparency in hearings of the Financial Stability Oversight Council. Sen. Johnson also mentioned the issue of transparency. Yellen was asked if she would support the Federal Reserve transparency bill introduced by Sen. Rand Paul.
Democrats seemed to be the only people at the hearing interested in the issue of transparency, a topic which should have enjoyed bipartisan consensus. It's not just that Paul is a libertarian conservative, or that his Republican father joined with Sen. Bernie Sanders to push for a Fed audit -- a move which should be celebrated across the political spectrum.
That's one reason why Republicans should have been pushing for transparency. More importantly, transparency is also a key element of efficient markets, according to economic theory. So why weren't conservatives, who claim to believe in the "wisdom of markets," pushing for it?