Iowa Sen. Harkin backs Yellen nomination, but Grassley on the fence

Janet Yellen received ringing endorsement from Sen. Tom Harkin Wednesday, but Sen. Chuck Grassley took a wait-and-see position on President Barack Obama's nominee to chair the Federal Reserve.

“Yellen has the experience, foresight and temperament that our country needs in a Federal Reserve chair,” said Harkin, a Democrat.

Grassley didn't question the qualifications of the Fed's vice chairwoman, but said his decision on how to vote on her confirmation will depend on how she approaches the job.

“She's eminently qualified. I don't have any doubt about that,” Grassley told Iowa reporters. “But then most of the people in those positions are eminently qualified.”

When assessing nominees, he said, the question is, “What are they going to do? What's their belief? What's their philosophy of the role of the Federal Reserve in fighting inflation?”

In his assessment, Yellen, 67, who has been on the Fed's Board of Governors since 1994, measures up, Harkin said.

“She has long recognized that the Fed's mandate is not just to produce stable prices, but also to promote full employment,” he said in a statement. “She saw problems in the housing market before the financial crisis hit."

"She understands how to marshal the Federal Reserve Board. In nearly every regard, she has the capacity to boldly address the issues critical to our economic recovery.”

Moreover, he added, “It is long past time for a woman to enter the ranks of the nation's highest economic policy makers.”

Yellen, who if confirmed would replace Ben Bernanke, would be the first women to lead the Federal Reserve Board. She has served a six-year stint as president of the Federal Reserve Bank of San Francisco, responsible for a region of nine states west of the Rockies.

Grassley doesn't expect Republicans to hold up Yellen's nomination, which goes to the Senate Banking Committee. He also assumes she will receive enough votes to be approved

He wants to know what strategy Yellen will propose “to avoid the catastrophic inflation that's going to come if they don't soon reduce their balance sheet.”

The Fed has been buying about $85 billion a month of government debt in recent years and now holds about $4 trillion of debt, Grassley said. Before the recession, the Fed held about $800 billion in government debt.

He wants the next chair to be “concerned down the road five or six years that we don't repeat the hyper-inflation that we had after the 1972 efforts to flood the world with printed dollars.”

Referring to what he called the hyper-inflation of the 1978-81 period, Grassley said the Federal Reserve needs to avoid repeating that “mistake.”

“How she's going to handle that will be a determinant of whether I will vote for her," he said.