On Wednesday President Obama nominated Janet Yellen to chair the Federal Reserve board.
In a glowing endorsement, President Obama praised Yellen’s keen understanding of the markets and her ability to call it as she see’s it. He said:
“Janet is renowned for her good judgment. She sounded the alarm early about the housing bubble, about excesses in the financial sector and about risk of a major recession.”
Based on Obama’s statement, Yellen would obviously be smarter than Bernanke, who didn’t see the housing crisis coming. How do we know? Please see below.
February 15, 2006: "Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise." – Ben Bernanke
May 17, 2007: “We believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.” – Ben Bernanke
Yellen About Herself
Back to Yellen. Did she really see the trouble in the financial sector (NSYEArca: XLF) brewing?
In testimony to a congressional committee in 2010, Yellen said the following:
“For my own part, I did not see and did not appreciate what the risks were with securitization, the credit ratings agencies, the shadow banking system... I didn't see any of that coming until it happened.”
Does this mean Obama is lying?
Lying is a strong word. Perhaps Mr. Obama was referring to Fed transcripts from December 2007, where Yellen is on record to have said:
“The possibilities of a credit crunch developing and of the economy slipping into a recession seem all too real. At the time of our last meeting, I held out hope that the financial turmoil would gradually ebb and the economy might escape without serious damage. Subsequent developments have severely shaken that belief.”
So perhaps Yellen did see a degree of trouble in advance and President Obama is simply ‘enhancing’ her credibility. It wouldn’t be the first non 100% correct statement by a politician.
In fact, we know of many well-documented lies and ‘omissions.’ Some of the most outrageous ones are listed here:
The Shameless, Obvious & Unreported Cheating Tricks of Politicians & Wall Street
Regardless of the President’s opinion, the stock market (NYSEArca: VTI) seems to prefer Yellen over other previous candidates like Larry Summers.
When Larry Summers withdrew from the Fed Chairman race on September 15 (Sunday), the S&P 500 (NYSEArca: SPY), Nasdaq (Nasdaq: QQQ) and Dow Jones (DJI: ^DJI) leaped higher the next morning.
Why? Banks expect Yellen to continue Bernanke’s legacy of easy money more than Summers would have.
Simon Maierhofer is the publisher of the Profit Radar Report.
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