Who is Dr. Janet Yellen, and why is she so important?!? Although her name is frequently in the news, does the public ask themselves what she does? Dr. Janet Yellen is the chairman of America’s central bank, the Federal Reserve Bank. As the face of the Fed, she is in charge of sharing the outcome of their meetings, the next one will be on December 14th. Therefore, it is timely to consider her role in our investment lives.
Dr. Yellen was nominated by President Barack Obama in October of 2013 to fill the chair seat previously occupied by Benjamin Bernanke. The senate confirmed she would be the first woman to hold the Fed chair on January 3, 2014. Again you may ask, so why is she important? An enormous amount of data, decisions, and information flows across her desk on a daily basis and it is up to her and her team to digest it all and take action when necessary. The primary motivation for creating the Fed in 1913 was to help promote a safe and sound monetary and financial system for our nation.
Dr. Yellen and Co. have a dual mandate to make sure employment is in line and to guard against outsized inflation. Her duty is to guide her board towards a consensus as to what is best for the U.S. economy and population. Although Dr. Yellen is the leader, each member’s vote on any given decision has equal weight. It is therefore one of her responsibilities to direct her committee to an agreement and a sound course of action.
The Fed chairman typically has a close relationship with the Treasury Secretary; the principal economic advisor to the President. The US Treasury oversees the day-to-day financial activity of the US Government. One of the Fed’s administrative obligations is to oversee the regulatory duties of our banking system and these are areas that are scrutinized during tough times. Both have the responsibility of maintaining the stability of our financial system.
The Fed chairman also plays an important role in the Group of Seven global finance ministers and central bankers of the world’s largest economies, aka the G7. The G7 meet and communicate often, especially if/when a financial crisis hits a member nation. The world has become more entwined than ever before, and the opinions and actions of the top financial players are warranted.
We will leave you with one closing thought. As we mentioned earlier, Dr. Yellen was appointed by our current President, Barack Obama. President-Elect Donald Trump has the power to appoint a new chairperson once the current Fed Presidents term expires 2018. In the meantime, Dr. Yellen has the ability to step-down of she chooses. Regardless of the outcome if she stays or goes, we will anxiously be awaiting her next move! We should pay attention to this doctor’s orders.