* Yellen visits college lab; highlights plights of
* Republican congressman says tour highlights Fed's
* More House hearings this year on Fed independence
* Fed chair defends easy policies, cites labor slack
(Recasts with tour of college; adds comment from economist and
from Rep. McHenry, background)
By Jonathan Spicer
CHICAGO, March 31 Federal Reserve Chair Janet
Yellen on Monday took a page from a politician's playbook to
defend the U.S. central bank's easy-money policies, citing the
struggles of three Americans in a speech and touring a college
workshop to shake hands with students and teachers.
It was her first public address since becoming Fed chair two
months ago, and the tour of a manufacturing laboratory at Daley
College on Chicago's southwest side was her first high-profile
effort to lend an empathetic ear to the concerns of Americans
five years into a frustratingly slow U.S. recovery from
At the lab, Yellen leaned in to watch as Masson Covington, a
29-year-old student, demonstrated how to precision-cut an
aluminum bowling pin with a computer-numerical-controlled lathe.
"Oh, that's great!" the head of the U.S. central bank said
as the machine's luminescent coolant splashed behind a glass
guard. "It's really simple," replied Covington. "I learned it
all from these classrooms here."
Ostensibly, the excursion to Daley College, a community
college that is part of the City Colleges of Chicago, was meant
to highlight promising efforts to train skilled workers and to
explain that the economy remains "considerably short" of the
Fed's of goal of maximum sustainable employment and stable
inflation, as Yellen put it in her morning remarks.
But behind the polite questions about course studies and job
prospects, the trip around Chicago may have been as much about
protecting the central bank's cherished independence from
If Yellen can convince college students that her sometimes
perplexing institution serves the public's interest, the Fed has
a better shot at beating back efforts in Washington it argues
could erode its ability to make unfettered decisions on monetary
"The Fed has been under attack because of some of the
bailout policies that were followed during the financial crisis,
and there is no vocal constituency on the Fed's side," said
Robert Eisenbeis, a former research director at the Federal
Reserve Bank of Atlanta who is now chief monetary economist with
"So, such outreach activities are simply an attempt to show
that the Fed does care about the public," he added. "Whether it
will work or not is a different story."
This year, the Republican-led House of Representatives
Financial Services Committee is holding what it calls an
"aggressive" series of hearings on the Fed examining everything
from the role its stimulus has played in swelling the nation's
debt to the impact it has had on seniors' savings.
Meanwhile, Republican Senator Rand Paul, a potential 2016
presidential candidate, is pushing a bill that would open up the
Fed's monetary policy deliberations to congressional audit. A
similar bill passed the House in 2012.
While an overhaul of the 100-year-old Fed is unlikely, the
debate could amplify as the November midterm elections approach.
Asked in the lab how well the Fed is understood, Covington,
a married father of three, admitted he knows little beyond the
fact that it "gets the money and deals with the money."
DORINE, JERMAINE, VICKI
Since the 2007-2009 recession, the Fed has effectively
printed some $3 trillion. It has kept interest rates near zero
for more than five years, and this month said it will keep them
there for a considerable time even after it ends its bond-buying
program, which is to be wound down later this year.
In her speech to some 1,100 people at a downtown convention
center, Yellen said the "recovery still feels like a recession
to many Americans, and it also looks that way in some economic
She said "considerable" slack still exists in the job market
and said further monetary stimulus could be effective.
"I think this extraordinary commitment is still needed and
will be for some time, and I believe that view is widely shared
by my fellow policymakers," Yellen said.
In an unusual move, she cited by name three workers who lost
their jobs or absorbed sharp pay cuts when the recession hit,
including one who "scrambled for odd jobs and temporary work."
"This is not just an academic debate," she said. "For Dorine
Poole, Jermaine Brownlee and Vicki Lira, and for millions of
others dislocated by the Great Recession who continue to
struggle, the cause of the slow recovery is enormously
"HOW POLITICAL THE FED HAS BECOME"
Road trips are common for the presidents of the Fed's
regional banks, who are supposed to gather information on the
economy to bring to policy-setting meetings in Washington.
But they have not been for the head of the central bank,
until Yellen's predecessor, Ben Bernanke, broke that mold with a
concerted public campaign to address the Fed's critics.
In his last few speeches before retiring, Bernanke said the
U.S. central bank needed to show it is working in the public's
interest or risk losing its policy independence.
Yellen, herself, who was the Fed's vice chair before
becoming the central bank's chief, was previously president of
the San Francisco Fed and did many such road trips.
Getting the message out "is all well and good, but I think
the average American is more concerned about the value of their
money, how much things cost, and whether or not they have a
job," Representative Patrick McHenry, a Republican who heads the
House Financial Services Committee's oversight panel, said in a
"This type of tour might further highlight how political the
Fed has become in intervening in the economy and the outsized
role they play," he said.
In House testimony in February, Yellen strongly rejected the
"Audit the Fed" bill, warning of how it could bring "political
pressures to bear on the committee's judgment about what is the
appropriate way to implement monetary policy."
The pressure could cool if the economy keeps improving. U.S.
economic growth picked up in the second half of last year, and
the unemployment rate has dropped from a post-recession high of
10 percent in 2009 to 6.7 percent last month.
That drop is due in part to the droves of Americans who have
given up the search for work.
Some economists and more hawkish Fed officials believe the
decline in unemployment means little slack remains in the labor
market and that inflation will soon rise.
Yellen disagreed, pointing to the unusually large proportion
of long-term unemployment and the elevated number of Americans
working part time who want full-time work. She also noted that
there has been little upward pressure on wages.
(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama and