In 2014, Janet Yellen became the first woman to be appointed Chairman of the Federal Reserve. Six years later, she is well on the way to becoming the first female Secretary of the Treasury in the United States.
the The Wall Street Journal reported on Monday that President-elect Joe Biden intends to appoint Yellen, 74, as head of the Treasury Department. Many other electrical outlets confirmed the news shortly after; Biden is expected to announce his intention to appoint Yellen and other Cabinet picks on Tuesday.
Biden’s choice isn’t necessarily surprising. In the days leading up to the decision, Biden declared his nominee would be someone who “will be accepted by all elements of the Democratic Party … progressive to moderate coalitions,” leading to widespread speculation that it would be Yellen, which most Democrats should support and many Republicans might have. wrong to oppose.
Yellen, from Brooklyn, New York, served as Federal Reserve Chairperson from 2014 to 2018 before President Donald Trump decided to replace her with current President Jerome Powell. Previously, she served as Chief Executive Officer of the Federal Reserve Bank of San Francisco, chaired the White House Council of Economic Advisers under President Bill Clinton, and was a longtime professor at the University of California at Berkeley.
“Yellen is eminently skilled, she oversaw a sprawling bureaucracy at the Fed. It would be incredibly difficult for various factions [Republicans, moderate Democrats, and progressive Democrats] to find a problem with its tenure, ”said Isaac Boltansky, director of policy research at Compass Point Research and Trading. “I don’t think she would make any side happy, per se, but she certainly wouldn’t make either side unhappy, and that could be as good as we can be.
As chairman of the Fed, Yellen oversaw the continued recovery from the Great Recession and left a solid heritage. Unemployment fell steadily, the stock market climbed, and inflation remained low under his tenure. Some of the strong economy Trump inherited can be attributed to Yellen.
That’s not to say that Yellen’s time at the Fed was perfect. As Sam Bell pointed out in Politico in 2018 some people say she was “too optimistic” about the possibility of using regulation to avoid the next financial crisis, that she went too slow with Wells Fargo following his fake accounts scandal, or that it hasn’t done enough to help the small banks. “And yet, on the crucial question of his appointment in 2014 – could we bring more unemployed back into the workforce without blowing things up for everyone? – it was unquestionably justified, ”Bell wrote.
Some people have also questioned the Fed’s decision to slightly increase interest rates under Yellen’s tenure, arguing that this was preventing the economy from reaching its full potential and get more people into the workforce. Of course, the hindsight is 20/20. And at the Treasury Department, Yellen will have nothing to do with interest rate decisions.
“Just as she avoided fiscal policy when she led monetary policy, I think she would hesitate to adopt monetary policy as secretary of the treasury,” Boltansky said.
Progressives have also raised questions about his previous comments regarding the deficit, that she described as unbearable.
Other candidates on the shortlist for Treasury Square include former Deputy Treasury Secretary Sarah Bloom Raskin; current Fed governor Lael Brainard; and Roger Ferguson, CEO of the Teachers Insurance and Annuity Association of America (TIAA), a financial services company, among others.
Biden to set economic agenda, virus tops his list
Running the Treasury Department is important work – the department oversees the IRS; the Office of the Comptroller of the Currency, which charters, regulates and supervises national banks; and the US Mint, among other offices – and the secretary plays a key role in advising the president on economic matters.
Prior to Biden’s announcement, there was quite a bit of back and forth among more moderate and progressive Democrats regarding the choice of the Treasury. Progressives have stood up for figures such as Senator Elizabeth Warren (D-MA) and Raskin, and urged Biden to avoid anyone with perceived industrial or Wall Street ties. Moderates, meanwhile, hoped for a figure seen as less divisive than Warren, more in the line of Ferguson or Brainard.
But it’s important to remember that whoever is chosen to lead the Treasury Department reflects the priorities of the Biden administration, not the other way around, and will likely be aligned with the White House’s stance on key issues.
“The Treasury Secretary and Biden will, at least publicly, be on the same page and deliver the same message,” wrote Ian Katz, director of Capital Alpha Partners, in a recent note to investors. “You won’t see Biden, for example, criticizing sanctions against other countries the Treasury Department is working on.”
At least as a first step, it will mean the new secretary will work with Biden on his top priority: tackling the Covid-19 crisis.
“They will not be able to remake the Treasury in their image, the Treasury will always be forced to sort, as every agency will, in the fight against the virus,” said Boltansky. “Anyone in this role will be a virus fighter first and then a secretary of the treasury.
This could translate into an attempt by the secretary to negotiate a new stimulus package with Congress, as current Treasury Secretary Steven Mnuchin did, without much success under Trump. It could also mean an effort to refocus the ministry on renewing CARES Act programs, such as restarting Paycheck Protection Program (P3) loans for small businesses.
Mnuchin recently decided to terminate loan programs put in place through the CARES Act and asked the Fed to return funds intended for these programs. Biden’s team criticized the move. If those programs are restarted under the Biden administration – which will become more difficult if funds are returned before inauguration day – the new secretary could also oversee them.
Biden also stressed the importance of reaffirming the US presence on the international stage, and The Treasury has a role to play there. We can expect more attention on the international stage from a Biden Treasury department than from Trump’s, and an effort to reaffirm international relations.
It is also possible that the Secretary of the Treasury (or other members of the administration) will end up playing several roles through the Vacancies Act, if Biden was struggling to make his choices through the Senate confirmation process. Trump has used this strategy often, such as when White House Budget Director Mick Mulvaney was Acting Head of the Consumer Financial Protection Bureau.
If confirmed, Yellen will once again find himself in one of the most powerful government positions in the US economy, albeit in a different role. And she should be particularly influential in the role.
“Although all the suitors [for Biden’s Treasury pick] would have Biden’s ear, we think Yellen’s voice would have the most weight with the president and his advisers, ”Katz wrote. “Not many people in the White House would like to debate economics with Yellen.”