NEW YORK (TheStreet) -- Today Janet Yellen is learning the difference between being the Fed's No. 2 and putative No. 1. Where a year ago she had a pen, and an audience of hundreds, now she has a megaphone and an audience of millions.
In her first statement before today's Senate hearing on her nomination, Yellen defended the policies of her predecessor, Ben Bernanke, adding that unemployment is still too high and inflation remains low.
So what happens next?
There were lots of theories before the hearing as to how things might go. Most involved questions about the Federal Reserve's Quantitative Easing policy, and its regulation of big banks.
But here's a question I haven't seen asked. Is Yellen going to play offense or defense? Her statement indicated she could go either way. What she gave in answer to questions was Bernanke's policy, but in plain English.
Several Republicans, like Idaho Sen. Mike Crapo, were ready with demands that Quantitative Easing stop because it supposedly causes inflation.
In response Yellen said the Federal Open Market Committee looks at the risks of QE at every meeting, that it increasingly focuses on risks of asset bubbles, but has not yet seen evidence of them.
The discussion of QE could easily have put Yellen on the defensive. She defended it vigorously.
"When we initiated this program, the unemployment rate was 8.1%," she noted, and it's now at 7.3%. "At each meeting we are attempting to assess whether we've seen progress in the labor market. What the committee is looking for is continued progress." When critics of QE pointed to the stock market, Yellen pointed to better housing prices creating a wealth effect that is helping recovery.
When Sen. Pat Toomey (R-PA) asked, "what happens when this morphine drip ends?" she did not back down, either. "Lower rates hurt savers, that's absolutely true, but I would argue that we can't have normal rates unless the economy is normal," she said.