Who could have saved us from the global financial crisis? In a word, women. The release of the Federal Reserve’s transcripts of policymaking meetings up to 2007 has shed new light on the machinations inside the central bank as the Great Recession dawned. One member of the Board of Governors cast in a positive light is Janet Yellen, the vice-chair, who saw the potential for trouble in the shadow banking system. She isn’t the only woman who might have done a better job than the man who outranked her:
Brooksley Born. The former chair of the Commodities Futures Trading Commission warned that the Commodities Futures Modernization Act of 2000 could lead to excesses in the derivatives markets. The act eliminated most monitoring and regulation of the over-the-counter derivatives market where the subprime loan crisis exploded. But Born was overruled by Larry Summers, the Treasury secretary, and President Bill Clinton signed it into law.
Alice Rivlin. As vice-chair of the Board of Governors and a possible successor to Alan Greenspan as chair, her resignation in 1999, just as the Fed began to raise interest rates for the first time in four years, came as a surprise. Her view of monetary policy the late 1990s suggests she correctly perceived the global economy as more fragile than Greenspan did; the markets’ crash in 2000 soon forced him to reverse course. She later criticized Greenspan for endorsing the 2001 Bush tax cuts, which ended up casting the nation into deep deficits.
Sheila Bair. She chaired the Federal Deposit Insurance Corporation before, during, and after the financial crisis. A strong believer in aiding consumers more and big banks less, she dissented from Treasury Secretary Timothy Geithner’s view that bailing out big banks – some of which she said didn’t need the help – was the best way to get the economy back on its feet. She argued for more accountability, but she lost; the big banks got their money, with few strings attached.
Christina Romer. The first chair of President Barak Obama’s Council of Economic Advisers wanted a much bigger stimulus package than the one he eventually proposed to Congress in 2009 - $1.8 trillion rather than about $900 billion. But before Obama even saw the plan, Summers, who was director of the National Economic Council, persuaded her to water it down to $1.2 trillion. The shortcomings of the initial package led Obama to pursue additional stimulus, an effort largely stymied by the Republicans in the Congress.
Would we be better off today if these women had held the top jobs in economic policy rather than the men who steamrolled them? There’s no way to know for sure, but my guess is that, in at least a few cases, the answer is yes.