Matthew C Klein, Columnist

Yellen Says, Yes, the Fed Makes the Rich Richer

Over the course of her nomination hearing before the Senate Banking Committee, Janet Yellen repeatedly admitted that monetary policy affects different segments of the economy differently.

November 14, 2013 at 8:28 PM UTC

By Matthew C Klein

Matthew C. Klein writes for Bloomberg View about the economy and financial markets. He previously wrote for the Economist magazine and its economics blog, Free Exchange. Before that, Klein was a research associate at the Council on Foreign Relations, where he spent more than two years studying the history of the Federal Reserve and the intellectual history of monetary economics for an upcoming book by Sebastian Mallaby. He also worked at Bridgewater Associates, where he studied the economies of Central and Eastern Europe and advised institutional investors on asset-liability management. Klein has a bachelor's degree in history from Yale University. Originally from Chicago, he lives in New York.

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During this morning's hearing, quite a few members of the Senate Banking Committee asked Janet Yellen, the president's nominee to run the Federal Reserve, whether the Fed was benefiting certain segments of society more than others. Unsurprisingly, Yellen's response was similar to what current Fed Chairman Ben S. Bernanke said when he was asked the same sorts of questions in July: The Fed is trying to help all Americans. Even so, Yellen's answers reveal that the central bank's policies are producing relative winners and losers.

Early on, Yellen explained that the purpose of the Fed's policies "is to bring down interest rates to promote spending in interest-sensitive sectors." That's helped autos and housingrelatively more than the rest of the economy. It also makes one wonder to what extent the Fed was responsible for some of the run-up in house prices during the go-go years, given its extraordinary efforts (at the time) to suppress interest rates.