Many progressives are feeling quite relieved that Larry Summers withdrew as a candidate for heading the Federal Reserve. Summers would certainly have been a disaster. But Janet Yellen, who just was nominated by President Obama, is no angel either despite her support from Elizabeth Warren and other liberals. In fact, there are important similarities between Yellen and Summers.
Yellen, who was in the Clinton Administration, was a strong supporter of NAFTA. The claim then was that NAFTa would create many jobs for American workers. Organized labor knew better, and so was opposed to NAFTA. Since it became law, close to 700,000 American jobs were lost as a result.
Yellen also was a strong supporter of abolishing the Glass-Steagall Act, the purpose of which was to reduce the risk of bank failures and to protect bank depositors from losses due to very risky investments. Of course the purpose of FDIC is to reimburse depositors for losses due to bank failure. However, if many mega-banks fail, which certainly cannot be ruled out, there is not enough money in FDIC's account to cover depositor losses.
Among the serious issues that current and future senior citizens confront is the attempt to dilute the social security program. An especially harmful proposal that is being seriously considered by the Obama Administration and many in Congress is to substantially reducing annual pension increases due to inflation. Yellen has been a major proponent of revising the inflation index downward so that senior citizens would receive a smaller increase. In fact, she wrote a letter to the Bureau of Labor Statistics requesting that it develop a cheaper inflation measure.
Just as we were enthusiastic when a black president was elected, we are pleased that for the first time the future head of the federal reserve will be a woman. But that should not blind us to where Janet Yellen is politically, which is certainly to the right of center.