President-elect Joe Biden has picked former Federal Reserve Chair Janet Yellen to be his Treasury secretary, according to people familiar with the decision, in a historic move intended to satisfy competing factions within the Democratic Party.
Yellen, a widely respected labor economist, would blaze a new trail as the first woman to head the Treasury Department seven years after becoming the first to helm the Fed. If confirmed, she would wield immense clout in shaping policy on taxes, financial regulation and the economy, and have a preeminent role in the international arena.
“Congratulations to Janet Yellen,” said Sheila Bair, who led the Federal Deposit Insurance Corp. during the 2008 financial crisis. “After breaking the glass ceiling at the Fed, she will now become the first woman to lead the US Treasury Department. Outstanding, unifying choice by the President-elect.”
Yellen would lead the administration’s response to an extraordinary economic collapse sparked by a pandemic that forced businesses across the nation to shutter and left tens of millions of Americans unemployed and seeking relief. The coronavirus has resurged in recent weeks, touching every corner of the country and threatening to cut off an economic recovery just as it was barely getting under way.
Democrats and Republicans have been locked in a stalemate for months in negotiations over a new economic relief package, and Yellen would likely play a big part in those negotiations on behalf of the Biden administration, pushing for a massive stimulus program that Republicans have been resisting.
Sen. Ron Wyden of Oregon, the top Democrat on the Finance Committee, praised Yellen and said a confirmation hearing should take place even before Biden is inaugurated on Jan. 20, noting that Treasury Secretary Steven Mnuchin’s hearing was held before President Donald Trump was sworn in.
“When millions of workers are unemployed through no fault of their own and sectors of the economy are struggling mightily, there is no excuse for delay,” Wyden said.
Biden’s transition team suggested a formal announcement wouldn’t come for another several days. “The President-elect looks forward to announcing some members of his economic team early next week who will work with him to build the economy back better,” Biden spokesperson Jen Psaki tweeted.
Yellen declined to comment.
Yellen, 74, who would become only the second person to head both the Fed and the Treasury, has spent decades focusing on reducing unemployment. She has also given considerable attention to economic inequality, an issue that has leaped to the forefront during the pandemic, which has hammered lower-income and minority Americans the hardest.
During her first year as Fed chair in 2014, she took the unusual step of giving a speech devoted to the topic and mentioned it regularly throughout her tenure.
Though viewed as more of a policy wonk than a political operator, she edged out other top contenders for the Biden Treasury job, including Fed Board Gov. Lael Brainard and TIAA CEO Roger Ferguson, himself a former vice chair at the central bank and one of the nation’s most prominent Black economists.
Before the news broke, Biden said his Treasury pick would win wide praise among Democrats, without naming Yellen. “You’ll find it is someone who I think is — will be accepted by all elements of the Democratic Party, from the progressive to the moderate coalitions,” the president-elect said.
Some progressives might be wary of Yellen’s past warnings that the U.S. would eventually need to get on a sustainable federal spending path. “If I had a magic wand, I would raise taxes and cut retirement spending,” she said in 2018. She has also spoken favorably about removing barriers to trade, another arena where she might clash with left-leaning groups.
As Treasury chief, she would work closely with Fed Chair Jerome Powell on providing support for the U.S. economy and could choose to reopen billions of dollars in emergency lending programs that Mnuchin has demanded be shut down by the end of the year.
One of her most immediate tasks would be rebuilding the ranks of career staff at Treasury, which dwindled under Mnuchin, particularly given his penchant for relying mostly on a close group of advisers.
Currently a distinguished fellow at the Brookings Institution, the Brooklyn-born Yellen has spent most of her career in academia, including a longtime association with the University of California at Berkeley, and at the Fed. She also served as President Bill Clinton’s chief economist during the boom years of 1997 to 1999.
In that role, she led a 1998 report with a section on economic racial disparities, a timely topic that has been given particular emphasis by the Biden team. “The median incomes of non-Hispanic white families and of Asian families are nearly double those of black and Hispanic families,” that report said. “The median wealth of non-Hispanic white households is 10 times that of blacks and Hispanics.” Little has changed since then.
An expert in macroeconomic theory rather than the granular workings of financial markets, Yellen nonetheless has years of experience dealing with the ups and downs of the U.S. economy, including serving as head of the San Francisco Fed during the 2008 financial crisis.
During her time as Fed chief, Yellen faced extensive criticism from Republicans in Congress for not acting more quickly to raise interest rates in the wake of the Great Recession, something they feared would lead to runaway inflation even as it helped the jobless rate steadily drop. She did not begin to move away from 0 percent interest rates until December 2015, when unemployment stood at 5 percent.
Her patience was ultimately validated, though she was also faulted by progressives for starting to raise borrowing rates too early. By February 2020, the unemployment rate had dropped to as low as 3.5 percent, with no sign that inflation was in danger of taking off, and Fed officials, including Brainard, have since said the central bank should have waited longer.
Still, the Fed Up coalition, a collection of community groups, unions and policy experts critical of the central bank’s rate hikes, advocated for Yellen to be reappointed in 2018.
Trump criticized Yellen during his initial bid for the presidency, arguing that she was artificially propping up the economy on behalf of President Barack Obama. But after being elected, Trump almost opted to reappoint her because of her easy money policies. (He also told reporters of his fellow New Yorker, “I like her, and I respect her.”)
He chose instead to elevate fellow Fed board member Powell, a Republican who had voted with Yellen on keeping interest rates low but was more sympathetic to efforts to ease restrictions on banks. Trump ultimately savaged Powell for more than a year on Twitter and in interviews for not doing enough to turbocharge the economy.
As head of the Fed, Yellen oversaw the imposition of new rules on banks after the 2008 financial crisis designed to reduce their reliance on debt and increase their cash on hand, part of implementing the landmark 2010 Dodd-Frank Act.
After Trump was elected, she continued to argue strongly for keeping those regulations intact, although she agreed to go along with the administration’s push to release insurance giant AIG — a central player in the 2008 crisis — from more restrictive oversight in 2017. She argued at the time that its moves after the Great Recession to shrink its footprint made it “less of a threat to financial stability.”
But she also warned repeatedly against forgetting the lessons of the financial blowup.
One of her final acts in the job was to impose a growth cap on Wells Fargo for extensive customer abuses, a punishment that the central bank has not yet lifted as the megabank continues to work to address the Fed’s criticisms.
Although Treasury does not have direct responsibility for financial regulations, the secretary chairs the Financial Stability Oversight Council, which convenes the heads of financial agencies like the Fed and the SEC and can exert political influence over the direction of regulatory policy.
Megan Cassella contributed to this report.
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