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Clinton choice for economic council seen as bridge to Fed

December 20, 1996 GMT

WASHINGTON (AP) _ For an administration that has gone out of its way to build bridges to the independent but powerful Federal Reserve, the selection of Janet Yellen as chairman of the Council of Economic Advisers was seen as an inspired choice.

While presidents have often picked their Fed nominations from the ranks of the Council of Economic Advisers, this is the first time a president has tapped a top Fed official to head the three-member panel that serves as the administration’s in-house think tank.

But given that a hallmark of Clinton’s first term was an effort to stay on good terms with the Fed and its Chairman Alan Greenspan, the decision to nominate Yellen, currently a member of the Federal Reserve, was viewed as astute.

``By picking Yellen, it allows Clinton to establish more links to the Fed and to Greenspan,″ said David Wyss, an economist at DRI-McGraw Hill Inc.

Yellen, 50, was an economics professor at the University of California at Berkeley when Clinton selected her two years ago as one of his first two appointments to the Fed.

While Wall Street worried that Yellen would be too dovish on inflation, she quickly learned to talk like a central banker and won widespread praise for her performance on the Fed, where she publicly supported Greenspan’s cautious approach to managing interest rates.

In accepting the nomination Friday, Yellen joked that she hoped to do ``half as well as my two distinguished predecessors.″

In fact, Yellen has close ties to both council Chairman Joseph Stiglitz, who was one of her college professors at Yale, and Laura Tyson, who was a teaching colleague at Berkeley.

Stiglitz is leaving the administration to take the job as chief economist as the World Bank while Tyson, who two years ago left the Council of Economic Advisers to take the job as director of the president’s National Economic Council, is returning to the faculty at Berkeley.

In a second Clinton term, both economic councils are expected to have less influence. Some economists noted that Princeton economist Alan Blinder, who was a member of the Council of Economic Advisers in Clinton’s first term, turned down an offer to return as chairman.

``Janet Yellen will be a competent head of the CEA, but I doubt that she will be the spokesman for administration policy that Laura Tyson was,″ said David Jones, an economist at Aubrey G. Lanston & Co. in New York. ``In this term, the real inside circle of policy-makers will be the president and Treasury Secretary Robert Rubin.″

Yellen’s speech still has traces of the Brooklyn where she was born and grew up. She attended Brown University as an undergraduate and received her doctorate in economics in 1971 from Yale.

She was an assistant professor for five years at Harvard, where Deputy Treasury Secretary Lawrence Summers was one of her students. She joined the faculty of the business school at Berkeley in 1980.

As an economist, she has specialized in the causes and implications of unemployment. She is married to another prominent economist, George Akerlof, and they have co-authored a number of economic articles. They have one son.