Coverage: Yellen joins former Fed chairs in panel discussion

Federal Reserve chairwoman Janet Yellen sat down with three former chairs Thursday night to discuss their views on the state of the economy, and all parties agreed the country is doing just fine.

Binyamin Appelbaum of The New York Times had the day’s news:

Janet L. Yellen, the Federal Reserve chairwoman, said on Thursday that she did not regret the decision to start raising interest rates in December.

“I certainly don’t regard it as a mistake,” Ms. Yellen said. “I said at the time and continue to feel that the economy had made very substantial progress.”

The Fed has put off further increases, but Ms. Yellen said it remained on a “reasonable path” toward higher rates as economic growth continues.

She spoke at a joint appearance with her three living predecessors that was billed as a discussion of leadership but inevitably became just another opportunity to ask present and past Fed officials about their economic outlook.

The people in the audience at International House in Morningside Heights, many of whom paid $1,000 for their tickets, got to hear Ms. Yellen reprise the upbeat economic assessment she has offered in other recent remarks.

“This is an economy on a solid course, not a bubble economy,” she said. “The U.S. economy has been doing well and domestic strength has been propelling us forward despite the fact that we have been suffering a drag from the global economy.”

She added that labor market conditions were “vastly improved.”

She was joined onstage by Paul A. Volcker, the Fed’s chairman from 1979 to 1987, and Ben S. Bernanke, who served as chairman from 2006 to 2014. Alan Greenspan, who served in between, appeared by video link from Washington, D.C.

Jonathan Spicer and Jennifer Ablan of Reuters had more details on the panel discussion:

In a casual moderated discussion, they expressed a remarkable amount of agreement over each other’s varied handling of the economy. They also agreed that China’s growing prominence posed more opportunity than threat, and that fiscal policymakers should step up more to support the Fed’s economic stimulus.

A hot topic for the panelists was the U.S. election campaign, in which Republican presidential front-runner Donald Trump has lambasted the central bank for helping to stoke asset bubbles.

“I certainly wouldn’t describe this as a bubble economy,” Yellen said, noting a “healing” labor market in which unemployment is 5 percent, or about where the Fed wants it.

While Volcker admitted he saw some “overextended” parts of the financial system, he agreed with Yellen, saying he does not believe the United States is in an economic bubble.

Asked about the monetary policy adage in which the Fed takes away the punch bowl just as the party gets going – and whether any of his successors added too much vodka – Volcker, who ran the Fed from 1979 to 1987, said: “My successors were great, all.”

Sam Fleming of the Financial Times highlighted Yellen’s insistence that the Fed’s December rate increase was a good choice:

Mr Volcker joined Ms Yellen in dismissing the idea recently floated by Mr Trump, the Republican party’s presidential frontrunner, that the US was in the midst of a bubble. The former Fed chief argued that there were aspects of the financial sector that were over-extended, however, with an excessive reliance on short-term borrowing.

Ms Yellen insisted that many of the hallmarks of financial excess, such as overvalued asset prices, high leverage and rapid credit growth, were not evident. She added that some of the darker worries that had initially accompanied the Fed’s expansionary efforts had proved misguided, saying: “None of these terrible things have happened.”

“The US economy has made tremendous progress in recovering from the damage from the financial crisis,” she argued as she defended the Fed’s handling of the economy. “We have really done a great deal to foster a more rapid recovery.”

While some investors have criticised the Fed’s December rate increase, she said: “I certainly don’t regard it as a mistake.”

Both Mr Bernanke and Mr Greenspan chimed in that they did not see a looming risk of recession.

Asked about the pressures of the job, Mr Volcker, who faced the gruelling task of crushing the high inflation that built up in the 1970s, admitted that as Fed chair between 1979 and 1987 he had “worried all the time”.

Mr Bernanke, who oversaw the Fed’s battle against the financial crisis of 2007-09, added: “I didn’t take the job for adulation, and if I had, it wouldn’t have worked.”

Mr Greenspan, who served from 1987 to 2006, said that while the acclaim he received on Wall Street during his tenure had been awkward, he easily got over any embarrassment.