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Janet Yellen Is the First Female Head of the Fed. Will That Matter?

Monetary policy is a feminist issue—and Janet Yellen has an opportunity to change some of the Fed’s basic values.

William Greider

December 20, 2013

(AP Photo/Charles Dharapak)

The Federal Reserve has always been a very masculine institution. In economic affairs, the Fed chairman resembles the stern father figure who disciplines the children and occasionally punishes them for unruly behavior. Only now, for the first time in its 100-year history, the Federal Reserve will be led by a woman—Janet Yellen. But will that make any difference?

In this era of gender equality, the polite answer is, no, a woman in charge of this powerful institution will do pretty much what any man would do in the same circumstances. I devoutly hope not. The confirmation of Janet Yellen as Fed chair raises intriguing possibilities for altering the operating values of the central bank and broadening its obligations to the country. Isn’t that what makes “old boys” of Wall Street nervous? Yellen, of course, is obliged to dismiss the question. Like any woman who manages to break through the glass ceiling, she has to bring superior technical skills and an impressive résumé in central banking. Yellen has both—and a reputation for thinking beyond narrow-minded traditions in economics.

Monetary policy, in other words, is a feminist issue, though in ways that may not be obvious at first. At a very deep level, girls learn to see some things differently from boys, and in Fed policy-making this can put women at odds with men. I witnessed this cultural tension in real personal terms at the Federal Reserve during the 1980s when Paul Volcker was chairman and described it in Secrets of the Temple: How the Federal Reserve Runs the Country (1987).

Listen to how Federal Reserve Governor Nancy Teeters—the very first woman to hold that title—described the experience. Teeters was appointed in 1978 by Jimmy Carter and served during Volcker’s dramatic campaign to defuse inflation with a long and brutal recession. Teeters dissented in meetings of the Federal Open Market Committee as Volcker persisted with the blood-letting. She was politely ignored. Her strong talk irritated the boys.

“I gave the FOMC a lecture,” Teeters told me. “I told them, ‘You are pulling the financial fabric of this country so tight that it’s going to rip. You should understand that once you tear a piece of fabric, it’s very difficult, almost impossible, to put it back together again.’” The metaphor, she pointed out to me, was one only a woman might use. “None of these guys has ever sewn anything in his life,” Teeters said.

Her opposition was not sentimental. As a professional economist, she argued that Volcker’s harsh policy was extreme and unnecessary. “It was very difficult for me philosophically to run the unemployment rate [which reached 12 percent],” Teeters said. “It was perfectly obvious to me we didn’t need to put interest rates up that high. We couldn’t do it without a recession, but recession is still a difficult decision to make. People get hurt. All sorts of nasty things can happen if it gets out of hand.” Which happened. The financial system became so frayed Volcker had to back off.

Teeters acknowledged frankly what most men would never admit. “I was scared and so was everybody else,” she said. Some of her colleagues resented her frankness. One complained, “She never said ‘we.’ She always addressed the other committee members as ‘you.’ ‘If you do this, you’re going to have worse unemployment.’ She was very consciously the outsider.” In practical terms, she truly was an outsider. When Teeters joined the Board of Governors, she found only two women in senior-grade positions.

Behind her back, the male-dominated orthodoxy disparaged Teeters as too liberal, but Governor Martha Seger, a conservative Republican who served after Teeters retired, was left isolated, too. Seger, too, dissented from Volcker’s unrelenting interest rates that kept unemployment higher even after the economy recovered. Seger told me she felt cut out of any policy discussions that mattered. “We have very little input into what I call the formulation stage, which I’m not accustomed to,” she said. “In corporate America, there is input all along the line.”

The differences in reasoning between girls and boys were examined as “gender-related moral differences” by Harvard psychologist Carol Gilligan in her best-selling book, In a Different Voice. Women, Gilligan explained, will usually seek to avoid “the fracture of human relationships that must be mended with its own thread.”

It is striking that Nancy Teeters and Carol Gilligan both used the same metaphor—the torn “social fabric”—to explain what makes girls different. Gilligan argued the society needs sensibilities that make equal space for what women know. “Sensibility to the needs of others and the assumption of responsibility for taking care lead women to attend to voices other than their own and to include in their judgment other points of view,” Gilligan explained.

Achieving that standard would pose a high challenge, not just for the Federal Reserve, but for the entire governing system. A lot of progress has been accomplished since the eighties, both in society and government. Hey, a forward-leaning woman named Yellen is now running the Fed. Maybe Yellen can take that powerful place further down the road to equality.

William GreiderWilliam Greider is The Nation’s national-affairs correspondent.


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