Janet Yellen was early advocate of intervention

Feb. 22, 2014 at 10:30 AM
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WASHINGTON, Feb. 22 (UPI) -- Transcripts from 2008 show the Fed's Janet Yellen was an early supporter of using a variety of policy tools aggressively to combat a feared U.S. recession.

The prolonged recession, the deepest and darkest economic slide since the Great Depression, was later officially given the starting date of December 2007.

In the summer of 2008, however, Bear Stearns collapsed and the scare was on. It was still, however, assumed to be a scare. Lehman Brothers did not collapse until the fall of that year.

In a late October policy meeting, Yellen advocated for quick, decisive action, the New York Times reported.

"We need to do much more and the sooner the better," Yellen said, when she was president of the San Francisco Federal Bank and, due to its rotating nature, not a voting member on the Open Market Committee.

"Frankly, it is time for all hands on deck when it comes to our policy tools," she said.

The transcripts reveal Yellen's remarks can be peppered with wit.

"In the run-up to Halloween, we have had a witch's brew of news," she said at one point.

Later, she apologized for being sarcastic, the Times noted.

In hindsight, however, historians scrutinize records to see who knew what and when to complete the sentence of "Had we listened to fill in the blank, all this might have been avoided or mitigated sooner."

Yellen, now chairwoman of the Federal Reserve System, was an early advocate for intervention. "I don't believe in gradualism in circumstances like these," she said in a meeting in March 2008, before the crisis took on a life of its own.

In January 2008, she saw the writing on the wall. "The severe and prolonged housing downturn and financial shock have put the economy at, if not beyond, the brink of recession," she said that month.

She then turned out to be persuasive. The transcripts are full of colleagues referring to comments she had made, the Times said.

She was an early skeptic of bank bonus pay, as well. "It seems to me that we have had an awful lot of booms and busts in which this type of incentive played a role," she said in early 2008.

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