Federal Reserve Vice Chairwoman Janet Yellen is President Obama’s nominee to takeover as head of the U.S. Federal Reserve. If confirmed by the Senate, she will be the first woman to preside over the central bank. She’s already one of the most powerful monetary policymakers in the world, but some Republicans are expressing concerns about giving power to yet another Keynesian with a proclivity toward printing money to prop up the economy.
One of those Republicans is Alabama’s senior U.S. Senator Richard Shelby.
During a 40-minute meeting with Yellen on Thursday, Sen. Shelby and the Fed nominee discussed a broad range of topics, most pointedly the massive size of the Federal Reserve’s balance sheet.
“We were very courteous in the meeting, but I expressed serious concerns with Federal Reserve policy,” Shelby told Yellowhammer News after the meeting. “At the top of the list is the continued printing of more and more money with no end in sight. The Fed’s balance sheet is now just shy of $4 trillion, and it’s still increasing at a clip of $85 billion a month. This backdoor stimulus package has us in uncharted waters, and it carries major inflation risks down the road. We don’t want to go back to the Carter days of stagflation, when economic growth was low and prices were increasing out of control.”
Sen. Shelby voted against Yellen last time she was nominated for a post at the Fed, citing her inflationary bias and lax regulations while she was President of the San Francisco Federal Reserve.
Staffers who attended the meeting Thursday told Yellowhammer that Yellen did not have a definitive answer for Sen. Shelby when he asked how she would “unwind” the Fed’s balance sheet. The Fed’s money printing operation has pumped over four times as much money into the economy as President Obama’s stimulus package, all without the approval of Congress.
Shelby also expressed serious concerns about “structural, long term high unemployment,” which he believes is becoming more of a problem, at least in part due to Federal Reserve policies.
Bringing it down to Main Street, many Republicans, including Sen. Shelby, believe Yellen’s monetary policies put the United States at enormous risk of experiencing rapid inflation. That would make every product Americans buy more expensive.
Also of note, while China is often mentioned by budget hawks as a major holder of U.S. debt — and it certainly is — the U.S. Federal Reserve actually holds almost twice as much of the U.S. debt than do the Chinese.
Finally, Sen. Shelby said he will be keeping an eye on the bank regulations put in place after the financial crisis that require banks to hold more capital. Shelby did not support the bank bailouts in 2008, and believes requiring them to be more capitalized is a smart defensive measure to protect the taxpayers from being put in a similar situation again in the future.
If confirmed, Yellen will be a key player in worldwide financial regulatory policy. Shelby, who has served on the Senate Banking Committee for 27 years, has not yet indicated whether or not he will vote in favor of her nomination. However, his pointed questioning on Thursday suggest he’s wary of how a Yellen administration at the Fed would impact the U.S. economy.
Follow Cliff on Twitter @Cliff_Sims
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