Janet Yellen has won the backing of U.S. labor leaders, including the head of the AFL-CIO, to be the next Federal Reserve chief over Larry Summers because of her support for central bank policies promoting full employment.
“She seems to be a better candidate,” Trumka, leader of the nation’s biggest labor federation, said today in an interview for “Political Capital” with Al Hunt to be broadcast this weekend. “When things were going wrong in the economy, in each one of those instances, she predicted them accurately. Larry didn’t.”
Yellen, 67, the No. 2 Fed official since 2010, would be the first female leader in the central bank’s 100-year history. Summers, 58, was Obama’s chief economic adviser until 2010 and helped him decide on giving aid to ailing automaker Chrysler LLC. Obama’s trust in Summers is a chief reason he is now considered a leading candidate to replace Bernanke.
Yellen, if selected, probably would continue Fed polices to stimulate the economy until jobs and wages recover from the recession that began in December 2007, said Paul Shearon, secretary-treasurer of the International Federation of Professional and Technical Engineers. Summers has been hesitant to back such an approach, he said.
“When it actually came time to stimulate the economy in other ways, we feel that he was hesitant in getting to that position and didn’t have a desire to go far enough,” Shearon said in an interview.
In a Feb. 11 speech at a conference sponsored by the AFL-CIO, the federation of 57 labor unions with 12 million members, Yellen spoke of the hardships endured by people out of work for extended periods or whose wages have failed to keep pace with the cost of living. She also said creating jobs should be “center stage” as the Fed begins to wind down its policies to stimulate the economy.
“These are not just statistics to me,” Yellen said, according to a copy of the speech posted on the Fed’s website. “We know that long-term unemployment is devastating to workers and their families. The toll is simply terrible on the mental and physical health of workers, on their marriages, and on their children.”
Trumka praised Yellen at a media breakfast today sponsored by the Christian Science Monitor and said any Summers’ endorsement of a jobs policy was unlikely to change the minds of many labor leaders.
Summers “may come out and say I am fully in favor of enforcing full employment as well as inflation,” Trumka told reporters at the breakfast. “If you looked at history, who do I think would be the best at that job to date, I think you know who that is. She’s been very balanced in her approach.”
Unemployment should be the highest priority for the Fed and “activist” policies to boost jobs are needed, said Owen Herrnstadt, director of trade and globalization for the International Association of Machinists and Aerospace Workers. Herrnstadt, who didn’t attend the Feb. 11 conference, read excepts of Yellen’s speech.
“She appears to be speaking to many of our concerns,” Herrnstadt said in an interview. “We would need to be convinced that he shares our concerns on unemployment and stagnant wage growth,” he said, referring to Summers.
Summers, a former Treasury secretary, also led Harvard University from 2001 to 2006.
Bernanke’s second four-year term ends Jan. 31. In a July 24 interview with the New York Times (NYT), President Barack Obama said he wants a chairman who understands the Fed’s dual mandate to promote maximum employment and price stability.
“I sort of assumed that Yellen was kind of a shoo-in given her background,” Dean Baker, co-director of the Center for Economic and Policy Research, a Washington-based group funded by labor unions and private foundations, said in an interview.
Summers “was a big proponent of deregulation. The Fed’s going to have to make some calls on a lot of regulatory rulings, both setting rules but also ongoing policy, and I would expect Summers would be much more Wall Street friendly than Yellen.”
As Fed vice chairman since 2010, Yellen played a key role in the Federal Open Market Committee’s campaign to pump up the economy. She’s been a defender of the central bank’s bond-buying, saying the strategy helped bring down long-term interest rates and reduce unemployment.
Summers has been more circumspect on the Fed’s bond-buying policy, said Lawrence Mishel, president of the Economic Policy Institute, a Washington-based research group focused on improving the living standards for low and moderate income families.
“We don’t know Larry Summers,” Mishel said in an interview. “Larry hasn’t articulated everything about monetary policy.”
Trumka said in an interview after the broadcast that while the AFL-CIO hasn’t taken a formal position on the next Fed chief, he has told Obama what policies are important to workers.
“Fed chiefs in the past that have only looked to their inflation-fighting mandate to the exclusion of their full-employment mandate, have cost this country and cost American workers,” Trumka said in an interview. “We’ve made this known to” the administration.
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