In October, five-time independent presidential candidate Ralph Nader wrote an open letter on behalf of Americans with savings and money market accounts to Federal Reserve Chair Janet Yellen criticizing the Fed’s near-zero interest rate policies. Yellen broke from the stoic tradition of Fed chairs in the past and directly responded in a letter to Nader.
In the open letter published by the The Huffington Post, Nader wrote:
[pull_quote_center]We are a group of humble savers in traditional bank savings and money market accounts who are frustrated because, like millions of other Americans over the past six years, we are getting near zero interest. We want to know why the Federal Reserve, funded and heavily run by the banks, is keeping interest rates so low that we receive virtually no income for our hard-earned savings while the Fed lets the big banks borrow money for virtually no interest. It doesn’t seem fair to put the burden of your Federal Reserve’s monetary policies on the backs of those Americans who are the least positioned to demand fair play.[/pull_quote_center]
He added, “We hear the Federal Reserve’s Board of Governors and the various regional board presidents regularly present their views of the proper inflation and unemployment rate, and on stock market expectations that influence their calculations for keeping interest rates near-zero. But we never hear any mention of us – the savers of trillions of dollars who have been forced to make do with having the banks and mutual funds essentially provide a lock-box for our money while they use it to make a profit for their firms and, in the case of the giant banks and large mutual funds, pay their executives exorbitant salaries… We are tired of this melodrama that exploits so many people who used to rely on interest income to pay some of their essential bills. Think about the elderly among us who need to supplement their social security checks every month.”
On Nov. 23, Yellen responded to Nader with a letter of her own, in which she blamed the “hardship” suffered by savers and “particularly seniors on fixed incomes” on what she described as a “continuing aftermath” of the 2007-2008 financial crisis and the “severe recession that followed.”
“It may help to review a few basic facts,” Yellen lectured. “These lower borrowing costs for millions of American families and businesses helped support asset prices—including home prices and, as you note, stock prices. More importantly, by making consumer purchases more affordable and encouraging businesses to invest, low interest rates supported the economic recovery and the creation of millions of jobs.”
“Would savers have been better off if the Federal Reserve had not acted as forcefully as it did and had maintained a higher level of short-term interest rates, including rates paid to savers? I don’t believe so. Unemployment would have risen to even higher levels, home prices would have collapsed further, even more businesses and individuals would have faced bankruptcy and foreclosure, and the stock market would not have recovered,” she wrote.
Nader’s open letter controversially suggested that Yellen consult her Nobel Prize winning economist husband George Akerlof on interest rate policy, a move that many observers interpreted as a sexist gaffe.
Slate’s Jordan Weissmann, who described Nader’s comments as “gross mansplaining,” wrote, “So, why is Yellen taking time to respond to a man who hasn’t been politically relevant for 15 years? This is purely speculation, but I don’t really think Janet Yellen cares all that much about Ralph Nader. But the man’s criticisms of the Fed just happen to closely mirror arguments made by some conservatives, who have made bashing the central bank a major economic theme of the GOP primary. So Nader’s letter gives her an excuse to very pointedly respond in writing to their accusations without looking too overtly political. Or maybe the woman just really took umbrage at that husband line.“