Janet Yellen, vice chair of the Board of Governors of the Federal Reserve and a professor emerita at UC Berkeley, is one of two individuals currently being considered by President Barack Obama to replace Ben Bernanke as chair of the Federal Reserve.

Yellen is a professor emerita of economics at Haas School of Business, and if appointed, she would be both the first female and first UC Berkeley professor to serve as chair of the Fed.

Larry Summers, who was previously U.S. Secretary of the Treasury, director of the National Economic Council and president of Harvard University, is also being considered. Obama is expected to select either Yellen or Summers for the position at the end of August.

Yellen received her doctorate in economics from Yale University in 1971 and began her career at UC Berkeley in 1980 as a macroeconomics professor at the Haas school. In 1985 and 1988, Yellen received the school’s Earl F. Cheit Award for Excellence in Teaching.

“Janet was always a phenomenal teacher — partly because she worked very, very hard at it,” said David Levine, an economics professor at the business school, whom Yellen mentored. “She thought about literally every word she would say. As she has moved up in government, this level of thoughtfulness and reflection has always been increasingly important — and as a high official of the Federal Reserve system, where literally, the placement of a comma can move the markets.”

Yellen’s experience working at the Fed includes serving as a member of its board of governors and as president of the Federal Reserve Bank of San Francisco. She was also chair of Bill Clinton’s Council of Economic Advisers.

While Yellen and Summers rival each other in academic and government experience, their economic values are on opposite ends of the ideological spectrum.

Yellen advocates economic regulation, supports the usage of stimulus plans to boost the economy and is expected to continue Bernanke’s policies if appointed. Summers supports policies of economic deregulation, but following the economic crisis of 2008, he has openly stated that he wants more regulation of Wall Street transactions.

Although Henry Brady, dean of the Goldman School of Public Policy, acknowledges that Yellen and Summers have “tremendous ideological differences,” he said they would both know how to handle the responsibilities of the Fed, like knowing when to ease up on monetary expansion.

Campus economics professor Brad DeLong, who worked with Summers as deputy assistant secretary of the U.S. Department of the Treasury when Summers was treasury secretary, enthusiastically supported Yellen’s appointment but has been vocal about his preference for Summers for the position.

“Larry Summers has an edge as the most creative thinker likely to successfully think outside the box should outside-the-box thinking be called for, and least likely to bind himself to an institutional consensus past its sell-by date,” DeLong wrote in a New York Times article.

Andrew Rose, an economics professor at the Haas school, has known Yellen for 28 years and says that Yellen is very persuasive, easily forms a consensus and is very calm and collected.

“One of the gripes about her is that it isn’t clear how well she will respond to a crisis, but we went through the Loma Prieta earthquake together in Barrows Hall,” Rose said.  “We really both thought that the building was going to collapse, but she stayed quite calm during the earthquake, which is a pretty impressive thing.”

Brady also believes that if Yellen is appointed to the chair position, her well-developed inner circle will allow her to transition smoothly into the position.

Contact Sophie Mattson at smattson@dailycal.org.

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The increase in interest rates from 3.4 to 6.8 percent will affect about 40 percent of UC Berkeley students who take out loans each year. In recent weeks, Democrats and Republicans in both houses of Congress have tried to pass proposals that would extend the subsidies or reform the federal student loans system, but disagreements over the government deficit and proposed reforms prevented a deal.

A proposal by Sen. Elizabeth Warren would fix the rate of subsidized loans to the rate given to major banks by the Federal Reserve at 0.75 percent. Another plan by House Republicans would tie student loan rates to the 10-year U.S. Treasury note, subject to market fluctuations but capped at 8.5 percent.

Rep. John Garamendi, D-Fairfield, a member of the House Committee on Education and the Workforce is outraged by the failure of Congress to pass effective legislation and attributes much of the inaction to the broader fight in the capitol over the deficit.

“You’ve got a large amount of money, a large number of loans to subsidize the interest rate and a great deal of conflict whether it ought to be done at all,” Garamendi said. “The question arises as to where the money should come from, so you’ve got the deficit issue.”

Rachelle Feldman, director of the UC Berkeley Financial Aid and Scholarship Office, said that some of the proposals put forth may have been more detrimental to students in the long run than the current expiration of the subsidy.

“We want student interest rates low in any permanent solution to the current problem,” Feldman said. “What we don’t want to see is for them to keep the interest rate on subsidized loans low at the expense of any other student-aid program.”

Currently, students who take out loans at UC Berkeley have an average of about $17,000 in debt upon graduation, compared to about $28,000 nationally. Because the subsidized loans have now doubled, Feldman estimates that the average borrower at UC Berkeley would see a difference in his or her monthly payment of about $15 a month over a 10-year repayment period, which amounts to about an extra $1,800 over 10 years.

The expiration of the Stafford subsidized loans will not affect the Stafford unsubsidized loans or the Stafford PLUS loans that graduate students and the families of students can take out that are offered by the financial aid department.

Brian McFadden, a junior at UC Berkeley, plans on taking out all Stafford loans offered to him for the coming year and until he graduates despite the rate increase. When asked about the increase in the interest rate, McFadden was quick to admit the difficulty of grasping the long-term consequences of the interest rate raise.

“People like me can’t think about it, since we have no experience of what it’s like after college being hit with all these debts,” McFadden said. “It’s just a number, an abstraction.”

But McFadden said he is cynical about the politics that surround the increase.

“The sad thing is that I am not surprised — this is business as usual for the country.”

Contact Chase Schweitzer at cschweitzer@dailycal.org and follow him on Twitter @ChaseSchweitz.

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