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Janet Yellen, former Federal Reserve Chair, speaks at a Brookings event, February 2018
Brookings Now

Janet Yellen on her love for economics, Greenspan’s “irrational exuberance,” and leading 19 Fed policymakers

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After finishing her four-year term as chair of the Federal Reserve in January, Janet Yellen joined the Hutchins Center on Fiscal and Monetary Policy at Brookings as a distinguished fellow in residence, alongside her Fed predecessor, Ben Bernanke. In her first public appearance since leaving the Fed, Yellen was interviewed by Bernanke at Brookings on February 27 about her life and career, and the state of the economy.


Below are selected clips from the event, in which Yellen discusses some highlights from her career. Full video of the conversation, including some deep dives into economic policy, is available here.


Yellen explained that when she went to college (Brown University) she was “impressed” that economics relied on logical thinking and rigorous analysis, but moreover, is “very much a discipline that is concerned with human welfare.”

She went on to earn her doctorate in economics from Yale in 1971.


In 1994, after more than two decades of teaching (Harvard, London School of Economics, Berkeley), and a stint as an economist with the international finance division of the Fed, Yellen was invited to accept an open position on the Federal Reserve board of governors in Washington, D.C. In this clip, she explains the call that brought her and her husband (Nobel laureate economist George Akerlof) to Washington:


In December 1996, then-Fed Chair Alan Greenspan delivered perhaps his most famous speech, warning that the stock market might be overvalued. “But how do we know when irrational exuberance has unduly escalated asset values,” he asked, “which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?” The Tokyo market immediately tumbled, as did others around the world the next morning, to regain their losses in the coming weeks. Yellen recounted that Greenspan showed her a copy of the speech in advance and, observing to him that the phrase was very late into the talk, said she thought “nobody is going to be awake by the time he gets to this.”


In 2004, Yellen became president of the Federal Reserve Bank of San Francisco, one of 12 regional Fed banks. She explained that when chartered in 1913, the region covered by the San Francisco bank was small in terms of population and economic output. Today, she noted, it covers 20 percent of the economy. She was there until 2010, and thus was in a key position during the early days of the housing bubble that contributed to the Great Recession. From day one, she said, her banking supervision staff expressed concerns about commercial real estate lending, including no-document loans, NINJA (no income, no job, no assets) loans, and more.

She added that as 2007 approached, “I had directors who were simply telling me about broad-based financial excess.”


Confirmed as Fed chair in January 2014, Yellen was the first woman to hold the post. Bernanke asked about her leadership style when leading a committee of 19 people. Yellen compared the job to a designer picking the right color for a room, and trying to get everyone who wants a different color “to see that off-white is not a bad alternative” to their first choices.

Yellen and Bernanke also took audience questions, during which she addressed inflation targets, the federal debt and deficit, the strength of the financial system and other topics. Visit the event’s web page to download the full audio and watch the video.

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