Clinton Names 2 Economists to Fed Board
President Clinton filled two vacancies on the Federal Reserve Board Friday, appointing White House economist Alan Blinder as vice chairman and UC Berkeley economist Janet Yellen to a second seat on the Fed’s seven-member board of governors.
Blinder and Yellen would be the first Democratic appointees to the board since 1980. Moreover, the appointments could give Clinton a chance to influence interest rate policies at the nation’s central bank, which uses interest rates to regulate the pace of economic growth.
Blinder, 48, a former Princeton economist who has played a key role in virtually every aspect of Clinton Administration economic policy, appears to be the odds-on favorite to succeed Fed Chairman Alan Greenspan when his term expires in March, 1996.
The widely anticipated appointments come at a crucial time for relations between the Fed and the White House. The Fed, still dominated by Republican appointees, including Greenspan, has raised interest rates three times since February and seems certain to raise them further in coming months to combat what it perceives as the threat of future inflation.
The Administration, while refraining from directly criticizing Fed policy, still argues that there is no sign that inflation is getting worse.
Appearing together at a White House press briefing, both Blinder and Yellen declined to comment on Fed policy, arguing that they will wait to discuss their views until their confirmation hearings before the Senate.
The nation’s financial markets have been fearful that Clinton would try to pack the Fed with advocates of easy money policies who would allow inflation to go unchecked. For that reason, the Administration’s nominees appear to be wary of making any statements that could roil Wall Street.
Yellen, 47, is a former Fed and Harvard economist with broad interests, ranging from the behavior of youth gangs to the dynamics of labor markets. She described herself to reporters as a “non-ideological pragmatist.”
As a faculty member at UC Berkeley, she had been a colleague of fellow Berkeley economist Laura D’Andrea Tyson, who was chosen by Clinton to serve as chairwoman of the President’s Council of Economic Advisers. Tyson, in fact, was deeply involved in the selection process for filling the Fed vacancies.
Yellen, who would succeed Republican Wayne Angell on the board, also fulfills the Administration’s desire to name a woman or a minority to offset the appointment of Blinder, a white male, to be Fed vice chairman.
Blinder, a longtime friend and classmate of Tyson’s at the Massachusetts Institute of Technology, has served as her principal deputy at the CEA since the beginning of the Administration.
In past comments, Blinder has made it clear that he shares the Administration’s view that inflation is not as big a threat as the Fed’s leadership believes. As vice chairman, he would succeed David Mullins, a George Bush Administration appointee who resigned in February.
Blinder not only would bring the voice of the Administration to the Fed, he would also bring a baby boomer sensibility to one of the most staid and convention-laden institutions in Washington.
When his appointment was announced at the White House by Treasury Secretary Lloyd Bentsen, Blinder stepped to the microphone and quoted Monty Python, the British comedy troupe that developed a cult following in the United States in the 1970s.
“In thinking about this change in positions from the CEA to the Federal Reserve over the last few days or even weeks, I can’t get the Monty Python line out of my head: ‘And now for something completely different,’ ” Blinder said. “It will be different in many, many ways, not the least of which is that the role of the CEA, as all of you know, is entirely advisory. At the Federal Reserve, I will be getting advice from all quarters of society all the time.”
Administration officials said that they have not ruled out the prospect of reappointing Greenspan to a third term as Fed chairman. Greenspan was originally appointed chairman in 1987 by Ronald Reagan--succeeding Paul A. Volcker, one of the most powerful Fed chairmen in history. He was reappointed in 1991 by Bush, but his second four-year term did not begin until 1992, when Congress finally approved his appointment.