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 It was her first public address since becoming Fed chair two months
ago, and the tour of a manufacturing laboratory at Daley College on
Chicago's southwest side was her first high-profile effort to lend
an empathetic ear to the concerns of Americans five years into a
frustratingly slow U.S. recovery from recession.
At the lab, Yellen leaned in to watch as Masson Covington, a
29-year-old student, demonstrated how to precision-cut an aluminum
bowling pin with a computer-numerical-controlled lathe.
"Oh, that's great!" the head of the U.S. central bank said as the
machine's luminescent coolant splashed behind a glass guard. "It's
really simple," replied Covington. "I learned it all from these
classrooms here."
Ostensibly, the excursion to Daley College, a community college that
is part of the City Colleges of Chicago, was meant to highlight
promising efforts to train skilled workers and to explain that the
economy remains "considerably short" of the Fed's of goal of maximum
sustainable employment and stable inflation, as Yellen put it in her
morning remarks.
But behind the polite questions about course studies and job
prospects, the trip around Chicago may have been as much about
protecting the central bank's cherished independence from political
interference.
If Yellen can convince college students that her sometimes
perplexing institution serves the public's interest, the Fed has a
better shot at beating back efforts in Washington it argues could
erode its ability to make unfettered decisions on monetary policy.
"The Fed has been under attack because of some of the bailout
policies that were followed during the financial crisis, and there
is no vocal constituency on the Fed's side," said Robert Eisenbeis,
a former research director at the Federal Reserve Bank of Atlanta
who is now chief monetary economist with Cumberland Advisors.
"So, such outreach activities are simply an attempt to show that the
Fed does care about the public," he added. "Whether it will work or
not is a different story."
This year, the Republican-led House of Representatives Financial
Services Committee is holding what it calls an "aggressive" series
of hearings on the Fed examining everything from the role its
stimulus has played in swelling the nation's debt to the impact it
has had on seniors' savings.
Meanwhile, Republican Senator Rand Paul, a potential 2016
presidential candidate, is pushing a bill that would open up the
Fed's monetary policy deliberations to congressional audit. A
similar bill passed the House in 2012.
While an overhaul of the 100-year-old Fed is unlikely, the debate
could amplify as the November midterm elections approach.
Asked in the lab how well the Fed is understood, Covington, a
married father of three, admitted he knows little beyond the fact
that it "gets the money and deals with the money."
DORINE, JERMAINE, VICKI
Since the 2007-2009 recession, the Fed has effectively printed some
$3 trillion. It has kept interest rates near zero for more than five
years, and this month said it will keep them there for a
considerable time even after it ends its bond-buying program, which
is to be wound down later this year.
In her speech to some 1,100 people at a downtown convention center,
Yellen said the "recovery still feels like a recession to many
Americans, and it also looks that way in some economic statistics."
She said "considerable" slack still exists in the job market and
said further monetary stimulus could be effective.
"I think this extraordinary commitment is still needed and will be
for some time, and I believe that view is widely shared by my fellow
policymakers," Yellen said.
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In an unusual move, she cited by name three workers who lost their
jobs or absorbed sharp pay cuts when the recession hit, including
one who "scrambled for odd jobs and temporary work."
"This is not just an academic debate," she said. "For Dorine Poole,
Jermaine Brownlee and Vicki Lira, and for millions of others
dislocated by the Great Recession who continue to struggle, the
cause of the slow recovery is enormously important."
"HOW POLITICAL THE FED HAS BECOME"
Road trips are common for the presidents of the Fed's regional
banks, who are supposed to gather information on the economy to
bring to policy-setting meetings in Washington.
But they have not been for the head of the central bank, until
Yellen's predecessor, Ben Bernanke, broke that mold with a concerted
public campaign to address the Fed's critics.
In his last few speeches before retiring, Bernanke said the U.S.
central bank needed to show it is working in the public's interest
or risk losing its policy independence.
Yellen, herself, who was the Fed's vice chair before becoming the
central bank's chief, was previously president of the San Francisco
Fed and did many such road trips.
Getting the message out "is all well and good, but I think the
average American is more concerned about the value of their money,
how much things cost, and whether or not they have a job,"
Representative Patrick McHenry, a Republican who heads the House
Financial Services Committee's oversight panel, said in a telephone
interview.
"This type of tour might further highlight how political the Fed has
become in intervening in the economy and the outsized role they
play," he said.
In House testimony in February, Yellen strongly rejected the "Audit
the Fed" bill, warning of how it could bring "political pressures to
bear on the committee's judgment about what is the appropriate way
to implement monetary policy."
The pressure could cool if the economy keeps improving. U.S.
economic growth picked up in the second half of last year, and the
unemployment rate has dropped from a post-recession high of 10
percent in 2009 to 6.7 percent last month.
That drop is due in part to the droves of Americans who have given
up the search for work.
Some economists and more hawkish Fed officials believe the decline
in unemployment means little slack remains in the labor market and
that inflation will soon rise.
Yellen disagreed, pointing to the unusually large proportion of
long-term unemployment and the elevated number of Americans working
part time who want full-time work. She also noted that there has
been little upward pressure on wages.
(Reporting by Jonathan Spicer; editing by Chizu Nomiyama and Leslie
Adler)
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