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11 28 2015 | by Victor Xing | Central Banks

What is Janet Yellen like in person?

Janet Yellen – an approachable policymaker in a “somewhat hierarchical” institution

Janet Yellen is known to be an approachable policymaker since her days as President of the San Francisco Fed.
In an interview with The Region, a publication of the Minneapolis Fed, then Governor Yellen talked about eating at the Board of Governors cafeteria to interact with Board staffers:

Region: Chatting with Board staffers, we learned that you are considered among the most approachable of the governors. How do you plead on that?

Yellen: I plead guilty. I like interacting with people. Wouldn’t you expect that to be the norm? I’m not sure why it should be a surprise that a governor would be approachable.

I was a staffer here. I’m an economist. I share the same interests as a large fraction of our staff. I enjoy hearing the details, for example, about the economic forecast. I don’t want to just see the bottom line, the summary. I want to track the numbers; I want to keep revisiting the key issues. Is inflation on track? Do the models fit? What are the puzzles? Where are the risks? Why is the dollar declining? And so I interact a lot with the staff around such issues. This is the aspect of the job I enjoy most.

Region: You were spotted up in the cafeteria or someone who looked very much like you, so they say. That’s a little uncommon among governors isn’t it?

Yellen: It is a bit uncommon, because the Board is a somewhat hierarchical place. I can’t frankly tell you why that is. But that’s not the way I operate. Eating in the cafeteria with the staff is a pretty good way to learn what people are thinking about, what’s on their mind. And I enjoy the interaction.

A good friend of mine (who went beyond the call of duty to teach me much about fixed income despite his role at an investment bank that could not benefit from our relationship) took a macroeconomics class taught by then Professor Yellen when he was getting his MBA at UC Berkeley.  During our conversations, he would often recount Dr. Yellen being approachable and polite to everyone around her (TAs, students, fellow faculty members).  While some big name economics professors like to act out their tenure status and be arrogant and dismissive toward “untrained thought,” Yellen was never like that and was patient with her students.

Yellen had the following to say about her teaching career:

Region: In the past you taught macroeconomics and international economics to MBAs and executives. Of the macroeconomic concepts you taught, which were the hardest to grasp for business people of the present and future?

Yellen: That’s an interesting question. Macroeconomics is intuitively harder to understand than microeconomics, since it concerns the interaction of many different markets simultaneously. In the end, macroeconomics comes down to understanding how supply and demand work in the economy as a whole, but it takes some time before MBAs and executives can really understand, for example, the transmission mechanism and how Fed policy affects the economy. The determination of exchange rates and the relationship between trade and capital movements in the international economy are also particularly difficult for students to grasp. But then, although we have a lot of interesting theories concerning exchange rates and trade flows, the reality is that none of them really work, so perhaps its natural for students to be confused.

The interview also touched on Yellen’s travels and food preference (answers are pretty vague, or maybe her passion for macroeconomics far outweighs other pursuits)

Janet Yellen’s views on social responsibility and the loss of her anonymity

The New Yorker does not immediately jump to mind in terms of macroeconomics coverage, but I would recommend the following article on Yellen and the Federal ReserveThe Hand on the Lever – The New Yorker.

Yellen on social justice and making the lives of people better:

In her senior year, Yellen attended a talk by James Tobin, an economist at Yale who had served in John F. Kennedy’s White House. Tobin spoke about the “life-cycle model of consumption”—a theory about how much people spend and save at different stages of life, and what that means for the management of the economy. She was so entranced that she applied to graduate school at Yale so that she could study with him. “Tobin was a person who really impressed me, because he had a passion for social justice and for public policy,” she said. She noted that economists are sometimes legitimately criticized for engaging in abstract mathematics without caring much about its ramifications. “But for Tobin it was always something that was about making the lives of people better.”

In an unusual move, Yellen expressed her thoughts on policymakers’ social obligation – a rare comment given her predecessors’ preference to avoid statements that may be interpreted as political.

In Yellen’s professional partnership with Akerlof, she has been the one more drawn to government. “When I started studying economics, I always had an aspiration to be involved in public policy,” she said. “I come from an intellectual tradition where public policy is important, it can make a positive contribution, it’s our social obligation to do this. We can help to make the world a better place. That’s where I was coming from. And so the notion of having the opportunity to serve in a high-level public-policy position, especially the Fed—this was really very attractive to me. It was something I couldn’t say no to, as long as my family was willing to support me.” After her Clinton Administration jobs as a Fed governor and as chair of the Council of Economic Advisers, she returned to the Berkeley faculty. In 2004, she became president of the Fed’s San Francisco bank, and then, in 2010, vice-chair of the Board of Governors, in Washington.

The New Yorker also touched on Yellen’s rising “financial celebrity” status and the loss of her anonymity (and approachability):

Dring the first few weeks after she took office, somebody came up to Yellen in an airport and said, “You look just like Janet Yellen!” That comment represents a step in a progression that she is rapidly making, between being unrecognized and being unmistakable. Her ability to move in the real world, and to use the information she collects to hone her economic instincts, is rapidly narrowing. She told me, regretfully, that she doesn’t feel she can meet regularly anymore with people in business and finance who make a living predicting what the Fed will do, because she can’t control what they might report about the conversation.


 Janet Yellen in July 2014
PHOTOGRAPH BY SOFIA SANCHEZ & MAURO MONGIELLO, part of the New Yorker article.  Chair Yellen in July 2014 – 7 months after she became head of the Federal Reserve System.


Federal Reserve security detail and Janet Yellen’s neighbors

Unfortunately for people who may be interested to stop by for tea and ask about economic conditions – as Chair of the Federal Reserve, Yellen now has a Federal Reserve Policesecurity detail, which makes her far less accessible.  Moreover, FED Chair’s words can move markets (and cause unintentional changes in funding cost), so Janet Yellen is more cautious in talking to members of the public than in the past (every time someone asks her a question, there is a risk of her releasing nonpublic information).

Read more about Chair Yellen’s security detail here: Security Detail for Fed Chairwoman Irks Neighbors.

Federal Reserve Police - security detail for Janet Yellen
Image credit: WSJ (from the above article)

Next article11 26 2015 | by Victor Xing | Capital Markets

What are ways to establish interest rates exposure?