The 2014 FOMC: A New Cast of Characters
President Obama met market expectations this week by nominating Fed Vice Chair JanetYellen to succeed Chairman Ben Bernanke. Assuming Yellen is confirmed by the Senate,she will begin a four-year term as Chair of the Federal Reserve on February 1, 2014.This transition in leadership is but one of several changes to the Federal Reserve that wewill see in 2014. Within the next few months, the composition of the Federal Open MarketCommittee is likely to look very different than it does today.We already know of three imminent vacancies on the seven-member Fed Board of Governors and the pending retirement of one Fed district bank president. More vacanciesare possible as 2014 progresses. These changes all come against the backdrop of theannual rotation of district bank presidents into voting seats on the FOMC.In another change, the Dodd-Frank financial reform legislation requires that a second FedVice Chair be named, in addition to the individual who eventually assumes Yell
s currentrole. The responsibility of the second Vice Chair will be to focus on issues of financialsupervision.Below we consider each of these changes in turn.
An Historic Appointment at a Critical Time
It’s official, if not surprising.
The nomination of Janet Yellen as Fed Chair came as a relief to markets that have been digesting a stream of bad news otherwise, mainly concerningfiscal gridlock in DC.If confirmed, Dr. Yellen will be the first woman to serve as Chairman in the 100-year history of the Federal Reserve System. And she will be the first Vice Chair of the Fed
Board to be promoted to the Chairman’s seat. Also, she would be the first Democrat tohead the Fed since Paul Volcker’s chairmanship (1979
Exhibit 2: A Fed Chairman Chronology, 1914-Present
Term as Chairman of the Federal Reserve
Chair Name From Until
Charles S. Hamlin August 10, 1914 August 19, 1916William P. G. Harding August 10, 1916 August 9, 1922Daniel R. Crissinger May 1, 1923 September 15, 1927Roy A. Young October 4, 1927 August 31, 1930Eugene Meyer September 16, 1930 May 10, 1933Eugene R. Black May 19, 1933 August 15, 1934Marriner S. Eccles November 15, 1934 January 31, 1948Thomas B. McCabe April 15, 1948 March 31, 1951William McChesney Martin, Jr. April 2, 1951 January 31, 1970 Arthur F. Burns February 1, 1970 January 31, 1978G. William Miller March 8, 1978 August 6, 1979Paul A. Volcker August 6, 1979 August 11, 1987 Alan Greenspan August 11, 1987 January 31, 2006Ben Bernanke February 1, 2006 January 31, 2014
Janet Yellen (nominated) February 1, 2014 NA
Source: Federal Reserve, Credit Suisse
The next step is for Yellen to testify at a confirmation hearing before the Senate BankingCommittee. (Currently, the Committee is comprised of 12 Democrats and 10 Republicans.)The Committee will then take one of four steps: report the nomination to the Senatefavorably, unfavorably, without recommendation, or it may choose to take no action. Assuming the Banking Committee approves Yellen, then the vote goes to the full Senate.