Starting at 10 a.m. today, Janet Yellen, the vice chairman of the Federal Reserve, will be grilled by members of the Senate Banking Committee about her nomination to replace Chairman Ben Bernanke. (You can read her prepared testimony here.) Here are five questions that I hope get asked:
1. A lot of folks have noticed that the recovery's meager gains have been highly concentrated among the rich. What, if anything, does this suggest for the future of Fed policy?
2. Before the crisis, most central bankers and economists thought bubbles should be ignored until after they burst. Is your view the same as it was then? How should the Fed evaluate the hypothetical trade-off of slower growth during the good years in exchange for a lower likelihood of financial crisis during the bad years?
3. There has been a lot of debate among economists, traders and regular folks about the Fed's asset purchase programs. How do you evaluate the costs and benefits of your bond-buying? Do you think there are different costs and benefits associated with purchases of U.S. government debt compared with agency-backed mortgage bonds?
4. As the Fed chairman, you would be one of the world's most important banking regulators. Do you think there are trade-offs associated with higher or lower equity capital requirements? If not, why not have 100 percent equity capital requirements?
5. Finally, shadow banks. Most folks at the Fed seem to agree that this area of the financial system remains prone to crisis, whether we're talking money-market funds, tri-party repo or mortgage real-estate investment trusts. What would you like the Fed, your fellow regulators, and those of us in Congress to do to ensure that these institutions won't endanger the rest of us?
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Matthew C Klein