Janet Yellen's Fed tenure may be the calm before the storm

05 February, 2018, 06:28 | Author: Franklin Nunez
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Yellen's final act at the Fed was to hit one of the largest U.S. banks, Wells Fargo & Co., with an unusual ban on growth that follows the San Francisco-based lender's pattern of consumer abuses and compliance lapses.

In fact, Obama's most consequential economic decision may have been to appoint Yellen in 2014, after reappointing her predecessor, Ben Bernanke, in 2010. Maximum employment is one of the two mandates Congress lays out for the Fed.

Yet after stabilizing the situation, Bernanke left Yellen a task that was in some ways just as hard, and probably more delicate, than the one he faced: how to nudge the recovery along until it was self-sustaining.

The Fed said Friday that Wells Fargo's business strategy prioritized its own growth at the expense of risk management resulting in compliance breakdowns.

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As the Fed chair, Yellen has guided the economy toward a healthy path.

In the meantime, Wells Fargo is permitted to continue accepting customer deposits and make consumer loans, the Fed said.

Her success in this area contrasted with a rare, but memorable, stumble by Mr. Bernanke: In 2013, as Fed chairman, Mr. Bernanke triggered what came to be called the "taper tantrum". Additionally, Wells Fargo plans refunds for customers who were charged extra fees to extend rate locks on mortgages because of delays caused by the bank. She believed the USA economy had entered an era in which the gravest threat was not a resurgence of inflation, but a prolonged period of weak job growth.

Critics remain convinced that the Fed sold out middle America by using low interest rates and money printing to boost Wall Street while neglecting the plight of many who still feel the stifling effect of the crisis and the stagnant growth that followed.

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Trump was highly critical of Yellen during the 2016 election but praised her after becoming president.

Powell, a Fed board member since 2012, is "thoughtful, balanced, dedicated to public service", Yellen said.

During Yellen's four-year term, unemployment fell to 4.1 per cent, from 6.7 per cent when she took office.

"His biggest challenge will be leading the further calibration of interest rates when the USA economy is late cycle amid a synchronized global economic upswing and fiscal stimulus is on its way", Kathy Bostjancic of Oxford Economics told AFP.

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