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Firm Hand

What happens in a Democratic-Republic when the most powerful person has an agenda which seems at odds with the legislative body?

We found out today when Janet Yellen, who is not at all orange, testified before the Senate Banking Committee for the first time since … well, really since all Hell broke loose. Financial issues have largely taken a back seat since the circus came to town and the opportunity to return to such a basic issue had the wonderful air or normality to it.

That didn’t stop anyone from trying to bring in the clowns, of course. But real leaders, like Yellen, know better than to take the bait. It was delightfully boring, as all banking should be. But it still had its moments.

Don't be fooled - Yellen is not amused.

Don’t be fooled – Yellen is not amused.

The real meat of the matter came in prepared remarks. The economy is strong and unemployment at 4.8% is within the range of what we might all call a healthy economy. We really did add 16 million jobs over the last seven years and things are on a very normal course. It’s time to raise interest rate, and a solid three hikes to get the Fed Funds rate up to 1.25% is definitely in the cards.

This means that the US Dollar will continue to appreciate and bonds will continue to sink from record highs. Imports are likely to become cheaper as a result and the balance of trade will probably overall improve as this happens. There will be pressure on manufacturing through it all, however, so most of the calls by Barataria for reduction in labor costs will, if anything, become more intense.

That’s not what Senators wanted to hear once the questioning period started, however. Yellen wisely demurred, as she always does:

We recognize that there may be significant economic policy changes and that those changes could affect the outlook. We’re very well aware of that. We don’t yet have enough clarity on what changes will be put in place to really clearly factor those policy changes into the economic outlook.


It’s interesting how the traditional view of a bank looks like the Parthenon.

What things are these? Repeal of the Affordable Care Act, axing NAFTA, and “doing a number” on Dodd-Frank. The latter got the most attention as well as the most direct snub. Yellen noted that the National Federation of Business reported only 4% of all small businesses are having trouble borrowing and that business lending is near its highest level eve at over 11% of GDP.

Republican Senator Thom Tillis questioned Yellen’s numbers of the availability of loans, calling them “absolutely defiant of what I’m seeing in the small business community and community banks particularly in North Carolina,” his home state. Tillis said the numbers he has seen show that business lending has slowed since Dodd-Frank has passed.

Commercial Lending, as a Share of the Economy.  Data from the St Louis Federal Reserve.

Commercial Lending, as a Share of the Economy. Data from the St Louis Federal Reserve.

We clearly have a situation where talking points are a key weapon in the ongoing War on Reality, charts like the one above be damned. Yellen made her case but left it at that.

The game goes on forever, like it or not.

The game goes on forever, like it or not.

What changes can we really expect in the coming months? What we do know is that Yellen, as usual, is the firm hand on the tiller that the nation needs and will continue to do her best to have a reality-driven policy which guides the nation to a new level of prosperity. Senators, on the other hand, have their own agenda and are fixated on screwing everything up.

Yellen, for her part, didn’t bite. As powerful as she is her job is up for renewal in just a year. Based on her performance today, staying as far away from the ideological circus as possible, any president would be wise to keep her. So we can assume something truly sad will happen instead. Still, it was a great performance that let the world know that, at least for now, adults are in charge somewhere.

8 thoughts on “Firm Hand

  1. As with any position of leadership… success (both personal and organizational) often comes down to whether or not you can be the bigger adult. Emotional tantrums might get the blood going, but steering the ship definitely requires a tempered hand, a cool head, and nerves of steel.

  2. Good blog. A keen perspective on the chaos and who is really in charge. I suspect many other bureaucrats like Yellen are the ones really in charge. A good thing.

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