Obama makes it official: Yellen to head Fed

From Capitol Hill to Wall Street, Janet Yellen is receiving strong early support as she looks to take over for Ben S. Bernanke as the first chairwoman of the Federal Reserve starting in 2014.

But the relief felt on Wall Street as President Obama formally nominated her Wednesday was overshadowed by the looming government shutdown and the battle over the federal debt ceiling — economic clashes that could color Ms. Yellen’s upcoming confirmation hearings in the Senate.

Ms. Yellen, a respected economist, longtime Fed official and vice chairwoman under Mr. Bernanke since 2010, received a restrained welcome from Wall Street, with the major stocks indexes barely reacting after her nomination leaked out Tuesday evening.

The Dow Jones industrial average Wednesday closed up 26 points, or less than half a percent, at 14,802.92, while the broader S&P 500 index finished at 1,656.40, up less than a tenth of a percent. The tech-heavy Nasdaq composite was down 17 points, or about half a percent, closing at 3,677.78.

“It seems the government shutdown will drive the markets more than Yellen,” said Dick Bove, a banking analyst with Rafferty Capital Markets in New York.

“You’ve got some huge issues out there right now that are taking center stage on Wall Street,” he added. “Investors are nervous about how the government will deal with things like the shutdown, the debt ceiling and a potential default.”

Mr. Obama, who was widely criticized for the messy vetting battle that preceded his selection of Ms. Yellen, called her a “champion for American workers” during a news conference Wednesday. She became the overwhelming favorite for the position when former Treasury Secretary Larry Summers dropped out of the running in the face of sustained opposition from liberal groups and a large bloc of Senate Democrats.

Ms. Yellen, widely seen as a key supporter of Mr. Bernanke’s stimulative monetary policies, will step in at a time when the U.S. economy is struggling to maintain its momentum on growth and jobs amid mixed economic signals. Financial analysts say her top priorities will be reducing unemployment and creating more jobs, while investors may soon test her willingness to combat any early signs of inflation as well.

Mr. Obama said his nominee understands both of the Fed’s missions — to fight inflation and to promote full employment.

“She’s committed to increasing employment and she understands the human costs when Americans can’t find a job,” Mr. Obama said. “American workers and their families will have a champion in Janet Yellen.”

Ms. Yellen, 67, will have her hands full. She signaled in the brief White House ceremony Wednesday that she saw the Fed still playing an activist role in keeping the nation’s recent economic progress from slipping away.

“Too many Americans still can’t find a job and worry how they will pay their bills and provide for their families,” she said. “The Federal Reserve can help, if it does its job properly.”

On Capitol Hill, lawmakers had mixed reactions to Ms. Yellen’s nomination. She was confirmed on a voice vote to the vice chairwoman’s post in 2010.

Senate Banking Committee Chairman Tim Johnson supported the nomination.

“She has a depth of experience that is second to none, and I have no doubt she will be an excellent Federal Reserve chairman,” the South Dakota Democrat said in a statement.

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