Two profiles of Janet Yellen that appeared in 2022 provide interesting and highly readable accounts of her life and accomplishments. Jon Hilsenrath's Yellen: The Trailblazing Economist Who Navigated an Era of Upheaval (HarperCollins, 2022) and Owen Ullmann's Empathy Economics: Janet Yellen's Remarkable Rise to Power and Her Drive to Spread Prosperity to All (PublicAffairs, 2022) end early in Yellen's appointment as Biden's Treasury secretary and so leave us in mid-history as it were, wanting to know the end of the story. That is what happens in biographies of living subjects, particularly when they are still in high-profile positions. That Hilsenrath and Ullmann wanted to profile Yellen should be no surprise: she is the first woman to serve as either Federal Reserve chair or secretary of the Treasury, the most senior woman economic policymaker in US history, a role model and breaker of glass ceilings.1 They view Yellen as the “RBG” of economics.2
Hilsenrath and Ullmann are veteran journalists with experience reporting from Washington. Hilsenrath, former Fed correspondent for the Wall Street Journal, delves into economics more frequently and in greater depth in his book than does Ullmann, who takes a lighter approach. The authors do a generally good job with weedy subject matter, but each book misses here and there on the details and substance of internal Fed debates and Federal Open Market Committee (FOMC) deliberations.
The Yellen they present is the same person I knew in my days at the Fed and whom you also know if you have worked or interacted with her professionally. She is whip smart, highly attentive to detail, incredibly well prepared, unassuming, and—my favorite bit—takes a suitcase full of books with her when she goes on vacation. It's a completely separate suitcase that, in all fairness, contains reading material not only for Yellen but also for her famous spouse, George Akerlof, and economist son, Robby Akerlof, when they travel together. I have already started packing differently.
The Hilsenrath and Ullmann accounts have much overlapping material, which should come as no surprise. They both begin with Yellen's upbringing and education and work their way to the present. Both authors received Yellen's full support and relied on interviews with her and her family, supplemented by additional interviews from others, press reports, and public Fed documents. Ullmann's account relies primarily on 150 interviews with friends and former colleagues and is written in a chatty, narrative fashion. In contrast, Hilsenrath leans to a greater degree on economics content and on discussions with former Fed policymakers and staff.
Hilsenrath tells Yellen's story in chapters that alternate initially between her and George Akerlof. The Akerlof chapters are as interesting and compelling as the Yellen chapters, and I don't do them justice here. We learn of Akerlof's multiyear efforts to get editors and referees at top journals to accept his “lemons” paper—a paper that questioned the then-standard assumption of perfect information in economic modeling. After three rejections, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” regarded as a seminal contribution to the economics literature, was published in 1970 in the Quarterly Journal of Economics.3
The two stories merge when Yellen and Akerlof meet in the Fed's cafeteria in the late 1970s. Akerlof's story falls to the sidelines after his receipt of the Nobel Prize in 2001. By including Akerlof in the story, Hilsenrath paints a portrait of a unique relationship that nurtures and sustains two highly accomplished economists. But the book's title is a bit of a misnomer. By his own admission, Hilsenrath set out to write “an economics book disguised as a love story” (331). The reader comes away thinking that his publisher must have insisted that the book's title misleadingly focus on the better-known protagonist to boost its broad appeal (and sales revenue).
Yellen was born in 1946 and grew up with her parents, Julius and Ruth, and older brother John in Brooklyn, New York, which in the years after the Second World War was home to many working-class and immigrant families. Her father was a physician, administering services in the community; her mother supported his work and tended to the household. The family had admirable values and ethics, consistent with the Jewish tradition of Tikkun Olam, which charges Jews with undertaking action to repair the world. Yellen was strongly influenced by her father's concern for his patients, many of whom had lost their jobs during the Depression and had difficulty paying him. Yellen credits this early life experience with her development of compassion for the poor and struggling and, eventually, her determination to use economics to improve living standards.
Ullmann's portrait of Yellen revolves around the idea that compassion and empathy have shaped her approach to economics—he titles his book Empathy Economics and comes back to this framing repeatedly. I bristled somewhat at this characterization, not because Yellen does not have empathy, but because in the context of monetary policy and the Federal Reserve, this characterization could suggest that Yellen does not believe in low and stable inflation, something that took the Fed years to establish and to which Yellen is firmly committed. The Fed has congressionally mandated goals of maximum employment and stable prices; during Yellen's time at the Fed, the institution adopted a monetary policy strategy that takes a “balanced approach” when those goals are in conflict.4 Ullmann's characterization admits no balance in the approach.
The first story Ullmann tells in his introduction, one designed to display Yellen's empathy, pertains to an incident in 2014 shortly after Yellen took over from Ben Bernanke as chair of the Fed. She spoke at an annual community reinvestment conference hosted by the Federal Reserve Bank of Chicago.5 In 2014, the labor market was far from fully healed after the Global Financial Crisis (GFC): the unemployment rate had fallen from its peak of 10 percent and stood at 6.7 percent at the time of the conference. In her first public speech as chair, Yellen (2014) spoke about the labor market and Fed actions to return the economy to full employment; she profiled three unemployed workers to provide some real-world context for the economics story she was telling. Two of the three individuals were convicted felons, a fact that could have adversely affected their job prospects and that came to light after the speech.6 As Ullmann notes, “The revelations sparked a major controversy” (3). I recall thinking at the time that the Fed had gotten itself into some unfortunate hot water.
When questioned by Ullmann about this episode, Yellen seems dismayed about the media response, saying, “Some newspapers made a big deal that these individuals had criminal records. I pointed out that a very large share of Americans—almost a third of adults—have some sort of criminal record” (3).7 That is indeed the case. However, the share of Americans with a felony conviction is closer to 8 percent.
After graduating from Brooklyn's Fort Hamilton High School in 1963, Yellen studied economics at Pembroke College, the adjunct women's college of Brown University. (It was not until the end of the 1960s and early 1970s that the all-male Ivies began admitting women or merging with their affiliate women's colleges to become coed.) During Yellen’s senior year, James Tobin—a Yale professor and former member of the Council of Economic Advisers (CEA) during the Kennedy administration—came to speak. Both Hilsenrath and Ullmann see the Tobin talk as a formative experience for Yellen. She told Ullmann that Tobin's seminar “was economics the way it should be done. And I wanted to work with him” (53). So she did. After graduating summa cum laude with an economics degree in 1967, Yellen moved to New Haven to attend graduate school at Yale; Tobin became her thesis adviser and lifelong mentor.
When Yellen became a professional economist in the early 1970s, women did not figure prominently in graduate programs or in economics departments. Yellen was the only woman in her entering class at Yale. In 1971—the year she received her PhD—less than 6 percent of new PhDs in economics were awarded to women. Yellen was one of two women assistant professors in the Harvard economics department in the early 1970s; neither of them was granted tenure. (Harvard did not tenure its first woman economist, Claudia Goldin, until 1990.)
The underrepresentation of women in the economics profession has been widely recognized and discussed.8 Today around one-third of new bachelor's and PhD degrees in economics are awarded to women. That share lags the proportion of women in other disciplines that also have been traditionally predominantly male, including STEM fields. Much of the current discussion in the economics profession focuses on the stalled progress of women and the substantial underrepresentation of minorities (Bayer and Rouse 2016; Lundberg and Stearns 2019; Chassonnery-Zaïgouche, Forget, and Singleton 2022).
The landscape was even less friendly for women economists forty or fifty years ago. Women like Yellen were isolated as graduate students and faculty. They seldom had mentors, and they most certainly had no role models. Ullmann provides a particularly good account of the climate for women in the 1960s and 1970s.9 Yellen saw Harvard as “a very hostile environment, with so few women” (66), yet at the same time indicates that she did not feel singled out for discrimination. Many women felt privileged to be a part of an elite club and did not necessarily take the absence of other women as a signal about their own acceptance or prospects. It's only over time with greater perspective and experience that we see the environment as having been unsupportive or antagonistic. From Ullmann: “Over the years, though, Yellen had given much thought to the barriers and how to break them down. ‘I have had much more occasion to think about all the ways in which women are held back in their careers since I've gotten older and studied women in the workforce more and become more attuned to the problems of women in economics,’ she said. ‘I've experienced rising consciousness’” (43).
In 1980, Akerlof and Yellen settled into academic life in California—he in the Berkeley economics department, she in the business school. From there, Hilsenrath and Ullmann move the narrative forward fairly quickly to 1994, when Yellen was approached by the Clinton administration about joining the Federal Reserve Board in Washington. Yellen was sworn in as governor that August and began her career as policymaker. She arrived at the Fed shortly after Alan Blinder was sworn in as Fed vice chair; the two liberal economists were the start of a shift in the Fed's board away from representatives of banking and industry toward PhD economists with academic interests.10
At the start of President Clinton's second term in 1997, Yellen was asked to move from the Fed to head up the CEA. There she dealt with a very broad range of issues, including important agreements on climate change and international trade. The inner circle of the administration was well established by that time, and Yellen found herself battling for a seat at the table with the “boys club” that included Bob Rubin, Gene Sperling, and Larry Summers.11 Ullmann's account of the challenges Yellen navigated in this alpha-male environment is particularly interesting.
In 1999, Akerlof and Yellen returned to Berkeley for a brief respite. But public service called Yellen back in 2004, this time for good. She moved first to the Federal Reserve Bank of San Francisco, where she served as president and CEO, presiding over a large institution with multiple offices and hundreds of employees working on monetary policy, banking supervision, community engagement, payments processing, and research. Yellen's stint as president coincided with the Fed's gradual, steady tightening of monetary policy in the run-up to the GFC and the turmoil of the crisis itself. In 2010, she was nominated by President Obama to succeed departing vice chair Donald Kohn back at the Federal Reserve Board in D.C. There she joined Ben Bernanke in guiding the US economy through its extraordinarily slow recovery; they formed a great partnership working together with the FOMC and Fed staff. When Bernanke left the Fed in early 2014, Yellen succeeded him as Fed chair.
Both authors take us through the important economic events of those years with largely similar accounts. While neither book provides a definitive history or analysis of the GFC and its aftermath—there are plenty of those already—both books give us Yellen's view and the recollections of those who interacted closely with her. She regrets not having paid greater attention to warning signs of froth and risks in the housing sector and financial markets. She entertains us with stories of Angelo Mozilo, CEO of the country's largest mortgage lender, and his decision to change Countrywide's charter to escape the oversight of Fed supervisors.12 As vice chair and then chair of the Fed, Yellen worked with Bernanke and the FOMC to craft Fed communications intended to make the committee's monetary policy reaction function more explicit.13 At the end of 2015, as Fed chair, Yellen steered the Fed in lifting the federal funds rate from near zero, where it had been since late 2008; and in fall 2017, she led the committee in initiating the process of balance sheet normalization, informally known as quantitative tightening or QT.
Beyond the public profile of Fed policymaker, Yellen played many roles inside the institution as vice chair: she supported Bernanke and helped him achieve consensus within the FOMC; she headed the communications subcommittee;14 and she supervised the staff research divisions. In the aftermath of the GFC, the Fed undertook a review of staff processes—work on policy options at the height of the crisis involved very few of the Fed's large staff, and the goal of the review was to think through why so few staff had been involved and whether there were changes in the process that could spread the burden and broaden opportunity. A management consultant was brought into the Fed to speak with staff in the research divisions. Ultimately, the process was changed—some of the changes occurred while Bernanke was chair and some after he left. The changes resulted in the involvement of a wider range of staff, replacement of some senior staff, streamlining of materials sent to policymakers prior to FOMC meetings, and a change in the timing of when those materials were sent. These may seem like small internal things, but they weren't. The Federal Reserve Board employs more than four hundred PhDs in economics and finance. The forecasts and other materials that the staff produces for each FOMC meeting number in the hundreds of pages. Involving a mere handful of the very capable staff and sending materials to policymakers only a few days prior to an FOMC meeting is not only inefficient but it places undue burden on policymakers and is unfair to staff. Many Fed chairs have left these sorts of internal procedures to the directors of the research divisions, so the review and the changes that followed were unusual in the Fed's culture. Hilsenrath tells us that Bernanke hired the management consultant “to help him think through how to run the place better” (220). Ullmann sees the reforms much more as a rejection of the way Bernanke ran the Fed rather than as a joint effort of Bernanke and Yellen.15
Both authors run into difficulty interpreting some of the more complex FOMC discussions. The FOMC is a large body, and, when debating subjects of a longer-term nature, the committee can operate a bit like Peyton Place—every episode matters and individual perspectives become clear only over time. Such was the case with the FOMC's inflation goal. First articulated to the public in January 2012,16 a possible inflation goal had been the subject of FOMC discussion since 1995. In the early 1990s, central banks in other countries had begun to use inflation targeting as a framework for monetary policy and adopted explicit inflation goals in the context of that framework; typically, the goal was 2 percent. In 1995 and 1996, the Fed chair, Alan Greenspan, teed up two FOMC debates around the adoption of an inflation goal and assigned then governor Yellen to a role in those debates. Reading the FOMC meeting transcripts from February 1995 and July 1996 gives you a good sense of Yellen's logical, structured approach to thinking about this important monetary policy issue.17
In recounting the 1996 debate, Hilsenrath and Ullmann suggest that Yellen and Greenspan disagreed about the inflation goal. Nothing could be further from the truth. At the meeting, Greenspan said the goal should be “zero, if inflation is properly measured.” Yellen responded, “Improperly measured, I believe that heading toward 2 percent inflation would be a good idea.”18 In the mid-1990s, measurement bias in the CPI was understood to be as high as 1.6 percentage points. Greenspan had testified about this topic in early 1995, calling on Congress to appoint an independent commission to study measurement bias.19 If the CPI was overestimating inflation by 1.5 to 2 percentage points per year, then Greenspan's definition of price stability—inflation of zero measured properly—aligns with 2 percent on the actual, improperly measured CPI. Thus, Greenspan and Yellen were agreeing, not disagreeing, about a 2 percent goal for measured inflation. As a Fed staffer during this period, I understood that Greenspan favored keeping inflation steady at 2 percent, but he did want to announce an inflation objective to the public.20
By the time Bernanke joined the Fed in 2002, he had written as an academic about the virtues of inflation targeting. In his confirmation hearings before becoming Fed chair, Bernanke was grilled about whether he would push the FOMC to adopt an inflation targeting framework—some members of Congress saw that framework as inconsistent with the maximum employment side of the Fed's dual mandate.21 By 2011, with the financial crisis over and Yellen leading the communications subcommittee, Bernanke opened the door to articulating an inflation goal. Charles Plosser, president of the Federal Reserve Bank of Philadelphia, began circulating a draft statement to several policymakers and eventually shared that document with Bernanke and the FOMC. Yellen, Plosser, and two other policymakers (Charles Evans and Sarah Bloom Raskin) revised the document in consultation with their colleagues; the end result was the first monetary policy strategy statement ever issued, complete with a 2 percent goal for inflation.22
Both Hilsenrath and Ullmann give Yellen too much credit here. Did she lead the subcommittee to get her policymaker colleagues to line up and support the statement? Yes. Was getting to consensus difficult? Absolutely, and Yellen deserves a substantial amount of credit for navigating that consensus.23 However, the authors do not provide a broad context for this episode; their accounts are without reference to foreign central bank experience, academic work, Bernanke's views, and the roles played by other policymakers. The adoption of a 2 percent goal for inflation is a very important development in the history of the Fed—one that will be written about for years to come—and both authors misrepresent the story.
At the time of release, Ullmann's book created a stir for suggesting that Yellen was uncomfortable with the size of the Biden administration's $1.9 trillion American Rescue Plan (ARP). Yellen had not been involved in its creation or in negotiations with Congress, all done during the transition or while she was awaiting confirmation as Treasury secretary. Many prominent Democratic economists agreed the ARP was too large. Yet when Ullmann's book was published, Yellen was forced to deny his account out of deference to the president, in whose cabinet she serves. Someday we can hope to learn the true story.24
These are interesting books and early biographies, but the definitive history has yet to be written. As Ullmann notes, “Legacies take years—often decades—to form, as the passage of time helps determine just how enduring a person's mark on history is” (401). Indeed.
Ellen Meade was on the official staff of the Fed's Division of Monetary Affairs from 2011 to September 2021 and was special adviser to Vice Chair Richard Clarida from October 2018 through December 2020.
Notes
G. William Miller also served as Federal Reserve chair and secretary of the Treasury (during the Carter administration).
“RBG” refers to Ruth Bader Ginsburg, former associate justice of the Supreme Court of the United States (1993–2020), second woman on the high court, and role model for women in the legal profession. Ullmann quotes Michelle Jolin, an interviewee, as saying that Yellen “really is the RBG of economics” (7). Hilsenrath made the same comparison during a private conversation.
The paper was rejected by the American Economic Review, the Review of Economic Studies, and the Journal of Political Economy.
The FOMC, the Fed’s monetary policymaking body, adopted its first Statement on Longer-Run Goals and Monetary Policy Strategy on January 24, 2012 (https://www.federalreserve.gov/monetarypolicy/files/FOMC_LongerRunGoals_201201.pdf).
The extent of the Fed’s work in communities is not widely recognized. Each of the twelve Federal Reserve Banks and the Federal Reserve Board in Washington has a group focused on community development; the outreach done by these offices to engage community actors and gather intelligence is not inconsequential. The Fed’s community arm was created in the mid-1970s to implement and administer consumer protection legislation. The Truth in Lending Act (TILA), passed in 1968, was the first consumer protection law; responsibility for administering TILA was given to the Fed. In the 1970s, Congress passed the Equal Credit Opportunity Act, Fair Credit Billing Acts, and the Community Reinvestment Act. Before the Equal Credit Opportunity Act was passed in 1974, women did not have standing as borrowers and could not obtain credit. Interesting accounts of the early years of consumer protection and the Fed’s role in administering the laws are provided by Frederic Solomon and Griffith Garwood in the Fed’s oral history interviews. See the list of interviews with former staff at https://www.federalreserve.gov/aboutthefed/centennial/interviews-with-former-staff.htm.
Ullmann claims Yellen knew before the speech about the criminal history of one of the individuals she profiled.
See data and references cited in Meade, Starr, and Bansak 2021.
See chap. 2, “An Economist Emerges,” pp. 45–73. Hilsenrath takes a shallower dive into this topic in his chap. 3, “Yellen at Yale and Harvard.”
Clinton went on to appoint other PhD economists to serve on the Fed’s board: Laurence Meyer, Alice Rivlin, Roger Ferguson, and Edward Gramlich. Chair Alan Greenspan, also an economist, was reappointed twice by President Clinton. For dates of terms in office, see https://www.federalreserve.gov/aboutthefed/bios/board/boardmembership.htm.
Hilsenrath and Ullmann use the term “boys club” in chapter titles (chaps. 11 and 5, respectively).
In 2006, Countrywide changed its bank charter to become a thrift institution and was subsequently supervised by the Office of Thrift Supervision.
The FOMC began including calendar-based forward guidance language in its policy statements in August 2011. That language indicated how long the committee expected to keep the federal funds rate near zero. In December 2012, the FOMC made a substantial change to that language, replacing the date-based forward guidance with economic conditionality. The statement said, “The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.” Policymakers and staff had been discussing this sort of language for some time. The formulation owes to Charles Evans (2011), president of the Federal Reserve Bank of Chicago (the so-called Evans rule) in a 2011 speech. Ullmann suggests that Yellen originated the idea, which is not correct, although she was definitely one of its proponents (239).
Since at least the early 1990s, Fed vice chairs have run an informal FOMC subcommittee on communications issues. Yellen’s subcommittee was particularly active and productive. The subcommittee generally takes up initiatives the chair supports, thinks them through, and advances concrete proposals to the FOMC for consideration and adoption.
Hilsenrath, chap. 18, “Yellen as #2: Palace Intrigue, 2010–2014.” See Ullmann’s chaps. 8 and 10, particularly pp. 275–76. Ullmann’s chapters include some eye-catching gossip: one source says Yellen had a “very tense relationship” with Dan Tarullo because, as de facto vice chair for supervision, he was difficult to work with and did not share information (230); another says that Yellen found Sarah Bloom Raskin to be a “weak member” of the Fed board and privately argued against Biden nominating Raskin to be the Fed’s vice chair for supervision (225).
An inflation goal of 2 percent, measured by the annual change in the price index for personal consumption expenditures, was included in the Fed’s Statement on Longer-Run Goals and Monetary Policy Strategy in January 2012. The statement is reaffirmed every January; in August 2020, the FOMC substantially revised its strategy, but no change was made to the inflation goal. See https://www.federalreserve.gov/monetarypolicy/historical-statements-on-longer-run-goals-and-monetary-policy-strategy.htm.
Transcripts and materials for FOMC meetings are available with a five-year lag on the Federal Reserve’s website:.
See FOMC meeting transcript, July 2–3, 1996, p. 51, at https://www.federalreserve.gov/monetarypolicy/files/FOMC19960703meeting.pdf. The full exchange was as follows:
CHAIRMAN GREENSPAN. Price stability is that state in which expected changes in the general price level do not effectively alter business or household decisions.
MS. YELLEN. Could you please put a number on that? [Laughter]
CHAIRMAN GREENSPAN. I would say the number is zero, if inflation is properly measured.
MS. YELLEN. Improperly measured, I believe that heading toward 2 percent inflation would be a good idea, and that we should do so in a slow fashion, looking at what happens along the way. My presumption based on the literature is, as Bob Parry summarized it, that given current inaccurate measurements, heading toward 2 percent is most likely to be beneficial.
Testimony by Alan Greenspan before the Committee on Finance, US Senate, March 13, 1995, at https://fraser.stlouisfed.org/title/statements-speeches-alan-greenspan-452/testimony-committee-finance-united-states-senate-8535. The Advisory Commission to Study the Consumer Price Index, informally known as the Boskin Commission, was appointed in 1995 and issued its report at the end of 1996. That report estimated that measurement error accounted for an overstatement of annual CPI inflation on the order of 0.8 to 1.6 percentage points per year.
Greenspan warned the FOMC about the dangers of speaking publicly about an inflation goal. Such an admonishment will strike today’s reader as odd, but Greenspan was not a big advocate of transparency. See July 2–3, 1996, FOMC meeting transcript, p. 72.
For a nice history of the drafting of the statement, see Lacker 2020.
I know this from firsthand experience. I assisted the subcommittee on communications and advised Vice Chair Richard Clarida during the 2020 revision of the FOMC’s strategy statement. Getting to “yes” is not an easy task.
Hilsenrath doesn’t wade into this territory in the same way: he portrays the size of the fiscal stimulus as a private discussion between Yellen and Larry Summers, with Yellen taking seriously Summers’s concerns about the size of the package (303–4).
