When the news reached Europe that Janet Yellen was in the running to succeed Ben Bernanke as Federal Reserve chairman along with Larry Summers, a frequent reaction on this side of the Atlantic was: "Janet who?"
By contrast, Summers, former U.S. Treasury Secretary and chief economic adviser to U.S. President Barack Obama in the banking crisis, had broad public recognition as a controversial American actor on the political, financial, and academic stage. Some recalled Summers' questionable role as chief economist at the World Bank. His failed Harvard University presidency was seen as a case study in American gender discrimination. As a crusader for financial deregulation, Summers lost credibility when he made millions by consulting for the deregulated financial industry.
Therefore, it came as no surprise that Summers, facing fierce opposition even from the ruling Democrats as Obama's first choice to replace Bemanke at the end of January 2014, took himself out of the race.
Janet Yellen could well endure an even more difficult tenure than Bernanke, who had to manage the aftermath of the U.S. housing bubble. Her biggest advantage may be that she does not belong to the inner circle of crusaders for financial market deregulation that brought about the worst global crisis since the Great Depression. As a highly respected economist who over many years has held top positions in the Federal Reserve system, Yellen was, of course, known to insiders in March 2010 when Obama appointed her as vice chairman of the Federal Reserve Board of Governors. In central banking and academic circles, she is highly regarded as a distinguished researcher with relevant policy experience at the Fed and at the White House. She also has an impressive track record at the helm of a large organization such as the Federal Reserve Bank of San Francisco from 2004 to 2010. Last but not least, she is the wife of Nobel laureate George Akerlof.
And there is what one might call a "German connection" with the academic Yellen-Akerlof couple. In the aftermath of German unification, when both Yellen and Akerlof were teaching at the University of California-Berkeley, they worked on the labor market impact in East Germany after unification. Together with two other colleagues from Berkeley, they published "East Germany in from the Cold: The Economic Aftermath of Currency Union" (Brookings Papers on Economic Activity, 1-1991).
After Obama, on October 9, formally nominated Yellen as the first...