Many Americans regard the Chair of the Federal Reserve System as one of the nation’s most powerful officials, second only to the President. The influence of the Federal Reserve Chair stretches beyond the borders of the United States, affecting the monetary policy and market conditions of nations throughout the world. Yet, to many Americans, the workings of the Federal Reserve System and the duties of the Chair are mysteries. The purpose of this lesson is to:
- Examine the historical development of the Federal Reserve System.
- Provide background on Janet Yellen, the new Federal Reserve Chair.
In this lesson you will learn about the role of the Federal Reserve Chairman. You also will learn about the current Chair Janet L. Yellen and the former Chair Ben S. Bernanke. You will complete a KWL (Know, Want to Know, Learn) chart while working through this lesson.
Start by printing the PDF file that contains the KWL Chart. Then fill in the first two columns with what you know and what you want to know about the Federal Reserve System, Ben S. Bernanke, and Janet L. Yellen. Finish working through the information in the lesson and complete the other activities before filling in the last column.
Ben Bernanke retired as Chairman of the Board of Governors of the Federal Reserve System on February 3, 2014. He served for over 8 years. He was originally appointed to the office as Chairman on January 31, 2006, by President Bush. Click here to view photographs and dates of service of the past Federal Reserve Chairmen.
Chairmen, Dates of terms:
Charles S. Hamlin Aug. 10, 1914-Aug. 9, 1916
William P.G. Harding Aug. 10, 1916-Aug. 9, 1922
Daniel R. Crissinger May 1, 1923-Sept. 15, 1927
Roy A. Young Oct. 4, 1927-Aug. 31, 1930
Eugene Meyer Sept. 16, 1930-May 10, 1933
Eugene R. Black May 19, 1933-Aug. 15, 1934
Marriner S. Eccles Nov. 15, 1934-Jan. 31, 1948
Thomas B. McCabe Apr. 15, 1948-Mar. 31, 1951
William McChesney Martin, Jr Apr. 2, 1951-Jan. 31, 1970
Arthur F. Burns Feb. 1, 1970-Jan. 31, 1978
G. William Miller Mar. 8, 1978-Aug. 6, 1979
Paul A. Volcker Aug. 6, 1979-Aug. 11, 1987
Alan Greenspan Aug. 11, 1987- Jan. 31, 2006
Ben S. Bernanke Jan. 31, 2006 - Feb. 3, 2014
Janet L. Yellen Feb. 3, 2014 - present
Whom did Ben Bernanke succeed, and in what year did this happen?
What were Ben Bernanke's academic credentials and qualifications for the Federal Reserve job?
What are some other highlights of Bernanke's tenure as Chairman?
Which US Presidents nominated Ben Bernanke for the position of Chairman of the Federal Reserve?
Who succeeded Bernanke as Chair of the Federal Reserve? What challenges does she face?
|Janet L. Yellen|
How Is the Chair Appointed?
Dr. Yellen was appointed Federal Reserve Chair through a process similar to the one used in other high level federal appointments. The Federal Reserve Act (FRA) of 1913 established the Federal Reserve System. The FRA explains who is eligible to serve on the Board of Governors and who may serve as Chair; it also sets term limits. The FRA states that to become Chair a person must be a member of the Board of Governors. This might suggest that only current Governors can serve as Chair but in fact, as pointed out by Andrew Foerster of the Federal Reserve Bank of Richmond, a candidate can be simultaneously appointed Governor and Chair. The President nominates people to serve as Federal Reserve Board Governors. Then the process moves to the Senate, where the nominee testifies before the Committee on Banking, Housing, and Urban Affairs. From there, the nomination moves to the floor of the Senate for a vote. The Chair is appointed to a four-year term. The Chair can serve several four-year terms, as did Alan Greenspan. These are a few of the "Most Frequently Asked Questions" about Dr. Yellen. If you need some help, go back to the information above.
What was Dr. Yellen's most recent appointment before becoming Chair of the Federal Reserve?
What position did she hold before being appointed as Vice Chair of the Federal Reserve System?
What are Dr. Yellen's academic credentials for the Federal Reserve job?
What sort of issues does Janet Yellen specialize in, and how might that help her as Chair of the Board of Governors of the Federal Reserve?
The Chairman of the Federal Reserve System is widely considered to be one of the most powerful people in the world. You will now be familiar with the new Federal Reserve Chair, Janet L. Yellen, and you will have reviewed the history and structure of the Federal Reserve System.
Now complete the "Learned" column in the KWL Chart. Include the following information:
- Ben Bernanke's place in Federal Reserve history
- The structure of the Federal Reserve
- How the Federal Reserve Chair is chosen
- Fed Chair Janet Yellen's background
If you need additional information to complete the chart, use www.federalreserve.gov for help.
Using the following information about the Great Depression, as written by Bernanke, have a discussion with your class or in small groups about the Federal Reserve's role in the Great Depression
In his book, Essays on the Great Depression, Bernanke refers to the Great Depression as the “Holy Grail of macroeconomics.” “I guess I am a Great Depression buff, the way some people are Civil War buffs," he wrote in the preface to the book. "I don’t know why there aren’t more Depression buffs. The Depression was an incredibly dramatic episode– an era of stock market crashes, bread lines, bank runs, and wild currency speculation, with the storm clouds of war gathering ominously in the background all the while.”
Between 1929 and 1933, the output produced in the U.S. plummeted by almost 30%. Further, the unemployment rate surged to over 25%, and more than 9,700 American banks failed. The huge number of bank panics occurring during this period was unprecedented, prompting President Franklin Roosevelt to make his famous statement, “The only thing we have to fear is fear itself.” The reasons for the onset of the Great Depression, causing unparalleled economic misery in the United States and around the world, have been widely debated. The Fed remained remarkably passive during the onset of the Great Depression. The Fed refused to perform its function as a lender of last resort (one of the major reasons for forming the Federal Reserve in 1913) for failing banks. The Board of Governors did not fully understand the negative impact that bank failures would have on the money supply and the economy in general. Milton Friedman and Anna Jacobson Schwartz discussed this in their influential book, A Monetary History of the United States, 1867 – 1960, reporting that the Federal Reserve “tended to regard bank failures as regrettable consequences of bank management or bad banking practices, or as inevitable reactions to prior speculative excesses, or as a consequence but hardly a cause of the financial and economic collapse in process.” Further, Friedman and Schwartz note, bank failures were concentrated among smaller banks while the Federal Reserve was controlled by big city bankers that “deplored the existence” of the smaller banks. In addition, the Federal Reserve System raised interest rates in 1931, which discouraged business borrowing and caused the money supply to shrink . With so much less money to go around, businesses could not get the loans they needed and were forced to stop investing.
What does Mr. Bernanke make of all this? He fully acknowledges the failings of the Federal Reserve System during the Great Depression. In fact, at a 2002 conference honoring Mr. Friedman’s 90th birthday, Bernanke, then a Federal Reserve Governor, told Friedman, “Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.” The Federal Reserve ’s response to more recent financial crises, like the October 1987 stock market crash and the economic downturn following the attacks of September 11th, 2001, suggest that they have learned their lesson from the Great Depression and won’t let such an event happen again.