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Home Publications Blogs Beat the Press Silly Yellen Bashing at the WaPo

Silly Yellen Bashing at the WaPo

Friday, 21 March 2014 00:20

The campaign to install Larry Summers instead of Janet Yellen as Fed chair was chock full of sexist innuendo as pundits speculated as to whether Yellen had the gravitas to hold down the job. The Washington Post's editorial on Yellen's first press conference showed that such attitudes continue in elite Washington circles.

The headline complained:

"In Fed media event, Yellen isn't able to control the message."

The piece itself told readers:

"Mr. Bernanke’s successor, Janet Yellen, met with reporters Wednesday and, bluntly, it didn’t go all that smoothly. Responding to a question, Ms. Yellen hinted that the Fed might start raising interest rates above zero “around six months” after phasing out the current bond-buying stimulus program; bond markets quickly sold off, which was almost certainly not what Ms. Yellen intended. Ms. Yellen also assured investors that there was no great significance to the Fed’s decision, announced Wednesday, to back off its previous plan to raise rates after unemployment hit 6.5 percent. But markets looked past her words to other Fed officials’ own interest-rate forecasts and drew contrary conclusions."

If you missed the earthquake in bond markets that was the basis for the Post's editorial you can be forgiven. The economy will probably miss it too. The linked article reports that yield on two-year Treasury notes climbed 7 basis points to 0.42 percent. This is a lot in percentage terms, but its economic impact is close to zero. The yield on ten-year Treasury bonds, which has far more impact on the economy, was little changed. It is still under 2.8 percent and has remained in pretty much the same range for the last month and a half, down from just over 3.0 percent in December.

In other words, if Yellen misspoke there was little obvious consequence. By contrast, her predecessor Ben Bernanke did spark a sharp rise in long-term interest rates with his famous taper talk last June. Partly as a result of this talk, the yield on ten-year bonds rose by more than one percentage point over a two-month period. While this rise in long-term rates did not appear to be his intention, it appears to have taken the air out of an incipient bubble in the housing market. In that sense, it may have been a remarkably good move, even if it was an unintended outcome.

Anyhow, it is striking that the WaPo didn't see the need to rebuke Bernanke for what appeared to major unintended consequences from a press conference, while Yellen does draw its wrath for a possibly mistake that will have virtually no economic impact.

Comments (12)Add Comment
Remember who these guys are
written by ifthethunderdontgetya™³²®©, March 21, 2014 7:24
Fred Hiatt and Jackson Diehl are the Editorial page editor and deputy editor, respectively.

These are the clowns who helped Bush and Cheney lie us into Iraq (land war began March 20, 2003). Rather than learn anything from this, they've filled their staff with even more chickenhawks, including the execrable Jennifer Rubin. And they've proceeded to cheer-lead for every possible war since (e.g. bombing Iran and Syria), while demanding Social Security cuts to pay for it all.

They are horrible people and they ought to be fired.

written by kharris, March 21, 2014 8:51
Granting any and all criticism of the WP and Fred Hiatt as more than justified, there is one more thing wrong with this piece. The position the editorial takes is married to the notion that being a Washington insider is all about power and control, rather than about doing a job and keeping the public informed. Yellen messed up because she couldn't "control the message". Screw that. I don't want the briefing that my employees provide me to be about "controlling the message". I want that briefing to be complete and honest.

Hiatt thinks Yellen failed the Washington manhood test by saying what's what. Hiatt is a Straussian cur.
Less Than 48 Hours After Yellen "Misspoke" Stock Market Hits Record High
written by Paul Mathis, March 21, 2014 9:10
While Obama-hater Hiatt agonizes over the bond market where he and his Con buddies have been investing over the past 5 years, those of us who bought into the Obama stock market rally -- "Hope and Change" from GOP de-regulation of Wall Street -- have been cheering Bernanke/Yellen and cursing the austerity/inflation crowd.

In a rational world Hiatt would have lost his job years ago and the WaPo deficit cutters would STFU, but Inside the Beltway the world is anything but rational.
written by skeptonomist, March 21, 2014 9:27
Wait a minute - is Dean saying that it is a good idea to be raising interest rates now, in order to forestall a bubble in housing? What about the stock market - shouldn't it be restrained as well? Is Dean recommending to Yellen that she continue to cause rates to rise to choke off bubbles? I think at other times Dean opposes raising interest rates (I certainly oppose raising rates now). Which is it?

I agree with Deans views on the WaPo's silly reaction to Yellen's press conference, but this post shows how impossible it is for the Fed to fine-tune the economy by manipulating interest rates, or by making announcements. Despite massive QE purchases, the Fed is clearly unable to control medium- and long-term rates in this way within a range which Dean thinks is important in the mortgage market.

And what does this show about monetary "credibility"? Here we have a case in which a significant market swing is basically a result of an interpretation of Fed statements which appears to be contrary to their actual intentions. It seems that people still don't take Fed statements absolutely literally.
written by kharris, March 21, 2014 9:57

you ask a bunch of questions that appear to have no basis in the text Dean has written. Is Dean saying it's a good idea to raise rates? Well if you think he is, then shouldn't you be able to show from the text what leads you to think he is? As it stands, everything you've written reads like a willful misinterpretation of Dean's text.
written by Barkley Rosser, March 21, 2014 1:53
Perhaps a fairer comparison would be to Bernanke's first and early press conferences. I do not think it was his first, but one of his very earliest he made some statement that rattled the markets around the world, although not as badly as his remarks last June. Part of the problem is precisely that the media does not know how to take a new Fed chair (and neither do the markets) with all of them being hypersensitive to anything that is said.

As it is Hiatt eventually admitted that the old UR target needed to be undone, even as he whined about her not replacing it with some other specific target. Would having done so avoided the market hiccup? No, that was due to the apparent willingness to raise interest rates possibly sooner than previously thought, and in fact Tim Duy has concluded that there is a real policy shift coming out of this last FOMC meeting, not made much of in the press conference, to the effect that the 2% target is now probably a ceiling again rather then just a target. That probably does deserved a hiccup, although indeed while the stock market fell much harder on the supposedly bad remark, it has definitely more than bounced back. But, in fact, for better or worse, her supposed "bad" remark probably did report the shift that has occurred. They have removed that 6.6% trigger level, but they may in fact be more willing to raise interest rates sooner than they were previously.
written by fuller schmidt, March 21, 2014 3:15
The Treasury 30y futures contract is most of the way back to Tuesday's closing price as well.
written by PeonInChief, March 21, 2014 4:29
Charlotte Whitton, once Mayor of Ottawa, once noted (she died in 1975) that women must do twice as well to be considered half as good. This has not changed.

Luckily, Whitton continued, this is not difficult.
Don't Raise Rates!
written by Dean, March 21, 2014 5:34
Just to be clear, I don't want to see the Fed raise rates. The bursting of an incipient housing bubble was a very good thing. I would have paid the rise in rates to see it, but I would have rather seen the Fed pursue other routes. Anyhow, right now I see zero reason to raise rates.
written by Larry Signor, March 21, 2014 7:00
…to avoid roiling financial markets.”. “Yellen earns mixed grades from Wall St.”. http://www.usatoday.com/story/...s/6643565/

I am so proud of Janet Yellen for this reaction. The Lady hath confounded the financial geniuses of the Street. Let their forward guidance be a little fuzzy. It will be entertaining, and perhaps re-distributive.

written by watermelonpunch, March 21, 2014 7:11
I'm with kharris... the person who seems to realize the real issue about this sexist posturing nonsense crapola in the media about Yellen.

Do we want someone in Yellen's position to be "controlling a message" with some kind of propaganda and nonsense?
Or do we want someone who speaks sense about what's going on and what may or may not be done?

And let's face it, Larry Summers was an epic fail in the past, and some people really thought he should have the job? Really? I imagine (reluctantly) that he has testacles, but that sure hasn't ever helped him from being an ass.

What do we want? (As a society.)

Balls to the wall in an economic tragedy?

Or practical information that can be used sensibly?

Makes you wonder if journalists these days just see their jobs as shadenfreude and nothing more.
On the subject of FRB, why is is still paying 0.25% interest on excess reserves?
written by John Wright, March 21, 2014 8:17
Now I'm no economist but doesn't the policy of paying 0.25% interest on excess reserves encourage the banks NOT to loan out money to the public?

Per http://www.federalreserve.gov/releases/h3/current/
the Fed is still paying 0.25% interest on reserves and excess reserves.

Why doesn't the FED drop the payment on excess reserves to encourage the banks to create more public loans as they can no longer profitably "lend" risk free to the FED and receive interest payments?

It seems to me the FED excess reserve rate is encouraging the banks NOT to lend to the risky economy while publically the FED appears to be keeping rates low to encourage the banks TO lend.

This seems cross purposes to me.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.