“Throw the Kitchen Sink at It”

Former Fed Chair Janet Yellen talks about managing the financial crisis and presidential interference

By ED CARPENTER, USF NEWS Posted Wed, 09/05/2018 - 12:12

Janet Yellen, former chair of the Federal Reserve and the first woman to hold the post, spoke to a sold-out crowd at USF Aug. 29.

In a 90-minute, sit-down interview with Suparna Chakraborty, USF associate dean for academic effectiveness and associate professor of economics, Yellen explained the Fed's actions in the wake of the 2008 financial crisis, tried to reassure audience members of the Fed's independence in the wake of public criticism by President Donald Trump, and more.

The mission of the Fed, Yellen said, is to achieve market price stability and full employment. In 2010, the Fed inherited wildly fluctuating markets and national unemployment hovered around 10 percent. After cutting overnight interest rates — the Fed's primary tool for influencing the economy — to essentially zero, it looked for other options. 

"Our approach was to throw the kitchen sink at it," said Yellen, who chaired the Federal Reserve Board of Governors from 2014­–18 and served as a member beginning in 2010. "We called economists to blue sky ideas."

To drive down long-term interest rates, the Fed came up with the novel approach of buying $4.3 trillion in bonds. It also signaled to investors that rates would remain low for years. Although it took longer to work than anyone liked, markets stabilized and unemployment dropped to 4.1 percent by the time Yellen’s term expired in January.

Partisan economics?

Asked about how attacks on the Fed by President Trump might affect the economy's management, Yellen called the president's action inappropriate but said the Fed has withstood worse and was created as an independent body to prevent political meddling.

"I have confidence that my colleagues will continue to act in a bipartisan way," Yellen said of the Fed.

Yellen spoke as part of USF's Silk Speaker Series, which was created by Jeff Silk '87 and his wife, Naomi, to bring to campus thought leaders on global affairs, the economy, and business. Previous speakers include Earvin "Magic" Johnson Jr., Steve Wozniak, and Condoleezza Rice.

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