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If Trump Called Janet Yellen and Asked Her to Stay at the Fed, What Would She Say?

James Langford

Updated from 2:17 p.m. on Wednesday, July 12, 2017

When inquiring minds want to know something, a TV ad campaign asserted in the 1980s, they turn to the supermarket tabloid National Enquirer.

When those inquiring minds belong to federal lawmakers, however, they can eliminate the middleman and go straight to the source, as members of the House Financial Services Committee did on Wednesday, July 12, repeatedly asking Federal Chair Janet Yellen whether she would stay for a second term.

They might have found more satisfaction with the Enquirer: Yellen's well-known poker face didn't falter.

The 70-year-old appointed by former President Barack Obama hasn't thought beyond serving out her five-year term, which expires in February, she told Rep. Carolyn Maloney, a New York Democrat who raised the topic first and highlighted a tradition of presidents reappointing Fed chairs chosen by their predecessors.

Ronald Reagan, for instance, kept Paul Volcker, who was originally nominated by President Jimmy Carter in 1979; Bill Clinton reappointed Alan Greenspan, a later Reagan selection; and Barack Obama asked George W. Bush appointee Ben Bernanke to stay on.

The current president, however, doesn't come from a traditional political background. Donald Trump, the real estate mogul who promised major economic growth and criticized the Fed on the campaign trail as too political, hasn't broached the topic with Yellen, a point she made repeatedly.

Several news outlets reported Tuesday that he's likely instead to give the job to Gary Cohn, the former Goldman Sachs Group Inc. executive who's currently director of the National Economic Council and leading the search for the next chair.

For Yellen, the questions Wednesday ranged from Maloney's supportive phrasing to the more pointed wording that came at the end of contentious comments from Rep. Sean Duffy, a Wisconsin Republican. 

"Do you anticipate that this will be your last time testifying before this committee?" he asked 

His GOP colleague, David Kustoff of Tennessee, may have come closer -- the closest, in fact -- to eliciting the information lawmakers wanted.

"In the next hour or so when this hearing ends, if you were to receive a call from the president telling you that he intended to nominate you for another term, would you accept?" he asked.

Replied Yellen: "It's certainly something I would discuss with the president, obviously."

Yellen, who holds a doctorate in economics from Yale University, previously served as the central bank's vice chair and was president of the San Francisco regional branch from 2004 to 2010. Even if she doesn't continue as chair, Yellen has a seat on the Fed's board of governors until 2024 if she wants it.

If the 56-year-old Cohn, who holds a bachelor's degree in business from American University, succeeds Yellen as Fed chair, he would be the first since the 1970s who's not an economist. The last was William Miller, an attorney for Cravath, Swain & Moore with a law degree from the University of California-Berkeley, who held the post for a year under President Carter.

A Fed chair with a background different from that of the post's most recent occupants might alter some of the central bank's communications strategies or the way it meets its mandate to provide financial stability, Michelle Meyer, a Bank of America economist said on a conference call with reporters Thursday.

"There's a question of, 'If you put somebody who has more business experience in, what does that do?'" she said. "How do they think about the flow of credit? How do they think about how that filters back into the economy? It presumably would change some of the priorities and some of the ways the Fed has conducted monetary policy."

The most vital qualifications for the role, said Ethan Harris, also a Bank of America economist, are an awareness of the Fed's past errors, a willingness to act independently and intellectual curiosity.

"The Federal Reserve has some serious mistakes it has made historically, and you must learn from those," Harris said. "One of them is, 'Do not allow political influence to determine whether you hike interest rates or not."

An effective Fed chair "really has a curious mind about financial excesses in the economy and is constantly asking whether there's a problem -- not necessarily doing a lot about it, but having the intellectual curiosity to explore that," Harris said. The person "can bring their own perspective," he added, but "it's very important they adopt some of the key aspects of what it is to be a central banker."

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