After swearing in, Yellen's next hurdle is GOP scrutiny

Janet Yellen is sworn in as Federal Reserve chair
Source: The Federal Reserve

The Janet Yellen era officially began with the new Fed chair's swearing in at the central bank Monday morning. But Yellen's real challenges start next week, when she faces the House Financial Services Committee on Tuesday and the Senate Banking Committee on Thursday.

The House appearance will mark her first major public comments as the newly installed head of the world's most powerful financial institution. Yellen will certainly face pointed questions on monetary policy and the central bank's plans to continue drawing down stimulus, even in the face of the emerging markets selloff and mixed U.S. economic data.

The deeply experienced economist and central banker should have little trouble handling these policy questions. She's expected to stress that the Fed is following no preset course and could pause the tapering process at any time if conditions warrant.

Republican scrutiny

But Yellen will also face mostly hostile Republicans, led by Financial Services Committee Chairman Jeb Hensarling, R-Texas, who wants to reduce the power of the Fed and open it up to further inspection by Congress.

Hensarling is expected to introduce legislation later this year that would make changes to the structure of the institution. Any such effort, should it clear the House, would face near certain failure in the Democratic Senate. But Yellen's performance before House Republicans will help determine how much momentum Fed bashers can generate. And there is no guarantee the Senate will remain in Democratic hands following the 2014 midterm elections.

The Senate Banking hearing next Thursday should be friendlier. But there are plenty of Republicans on the panel, including Mike Crapo (Idaho), Richard Shelby (Alabama) and Bob Corker (Tennessee). They'll will press Yellen on Fed transparency and the impact of the quantitative easing campaign on asset prices and possibly wealth disparity. Many Republicans view the Fed's policies as an opportunity to deflect charges that the GOP is mostly to blame for growing income inequality.

The next big test comes March 19 at the close of the central bank's policy meeting, when Yellen holds her first press conference. While the new Fed chair has done plenty of public speaking and handled question-and-answer sessions after events, those are quite different than full-dress press conferences with Wall Street and the rest of the world hanging on every word.

One senior Democrat recalled in a recent interview how many assumed that Tim Geithner, then the new Treasury secretary, was so smart and experienced at the New York Fed that his first press conference—during the height of the financial crisis—would be a breeze.

It was instead an abject disaster, with Geithner appearing to many like a deer in headlights.

"No matter how smart and talented and agile you are, it takes some time to get good at this kind of stuff," the senior Democrat said. "She will probably be fine, but it's never a guarantee."

(Read more: Don't call me 'chairwoman,' Yellen says)

Tough political headwinds ahead for Obama

Yellen is also a largely unknown quantity on Wall Street, having spent most of her life in academic circles. It's not necessarily a problem that she is not well-known to the Jamie Dimons and Lloyd Blankfeins of the world. And those relationships will certainly come in time as Yellen schedules the usual talks at big New York events. But if there are any bumps in the road early on, it could be helpful to have direct lines of communication to the most powerful players in the financial industry.

On the policy front, Yellen and the rest of the Fed should at least have a little clearer picture of the economy's direction by the March meeting.

(Read more: Forget the State of the Union, focus on the Fed)

Focus on Friday's jobs report

Some clarity should come this Friday with the release of the January jobs report. At its last meeting, the Fed made clear that it viewed the very weak December reading of just 74,000 new jobs as an aberration. And most economists agree. Expectations for the January number are around 180,000 new jobs, with upward revisions expected for December.

But if the January and February numbers wind up looking weak, then the Fed may come under some pressure to at least consider pausing its monthly tapering of bond purchases.

One thing Yellen and the Fed should not have to worry about is a debt ceiling crisis coinciding with the March meeting. The Treasury says it will run out of borrowing room this Friday, Feb. 7, but will have emergency measures available to get through at least a couple of weeks without flirting with default.

Some Republicans in the House still want to test Treasury's drop-dead date and make significant demands in return for a debt ceiling hike. But House GOP leadership is firmly against waging another doomed-to-failure campaign to wrest big concessions in return for lifting the borrowing limit. So while there might be some skirmishes and perhaps even a failed vote on the House floor, the debt ceiling is likely to get raised without significant difficulty.

That means Yellen will have to only worry about Republicans, who want to curtail the central bank's power, and a global economy that seems ready to unravel at the slightest provocation. Should be no sweat.

—By Ben White. White is POLITICO's chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet POLITICO Morning Money [politico.com/morningmoney]. Follow him on Twitter @morningmoneyben.