Fed's Yellen defends QE2, says creating 3 million jobs

[The Northerner]

DENVER (Reuters) – Federal Reserve Vice Chair Janet Yellen on Saturday defended the central bank's controversial program to buy assets in order to stimulate the economy, citing an internal study showing the full program will result in a gain of 3 million jobs.

"It will not be a panacea, but I believe it will be effective in fostering maximum employment and price stability," Yellen said while participating on a panel at an economics conference.

The Fed's latest plan to buy assets announced in early November -- dubbed QE2 because it is the Fed's second round of quantitative easing -- had sparked sharp criticism domestically, internationally, and even within the Fed itself, for weakening the dollar and risking dangerous inflation.

Yellen, whose defense appeared aimed at mollifying all of those critics, said a simulation approximating the most recent asset-buying program was shown to generate about 700,000 new jobs.

That exercise assumed buying $600 billion in longer-term Treasuries, holding them for about two years, and then unwinding the position over the following five years.

Read more: http://news.yahoo.com/s/nm/20110108/pl_nm/us_usa_fed_yellen