Joe Biden nominated Janet Yellen as Treasury Secretary. Yesterday, the President-elect chose the former Fed chair to take over Steven Mnuchin at Treasury. In 2014, Yellen became the first female Fed chief. If confirmed, she will become the US’s first female Treasury Secretary.
Biden Nominates Janet Yellen as Treasury Secretary
At present, she faces the task of sorting out the economy while the coronavirus still rages on. Also, she will need to address the huge unemployment and manage a growing mountain of debt.
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The markets applauded the choice of Yellen as the better choice. They expect her to focus on economic turnaround instead of applying progressive agenda. Barry Knapp of Ironsides Macroeconomics sees this as a win. “To me, it shows Biden is taking stuff pretty seriously and definitely not pandering to the left,” he says. “She’s a very serious economic thinker, and they have some very serious problems to deal with,” Knapp added that the nomination could be worse. Biden could’ve selected “someone that was hawkish on the banking sector.”
Even some Republicans agree to the nomination. Trump’s top economic adviser Gary Cohn approves the selection. He said in a statement that Yellen is an “excellent choice for Treasury secretary. Having had the opportunity to work with then-Chair Yellen, I have no doubt she will be the steady hand we need to promote an economy that works for everyone, especially during these difficult times.”
Not Elizabeth Warren
Specifically, markets worried about progressive Senator Elizabeth Warren of Massachusetts getting the job. Warren is an outspoken figure who wants tighter regulation for banks. After the 2008 financial crisis, her publicized stands against big banks were well-known. Then, she got noticed for her role at the oversight panel of the Troubled Asset Relief Program. Also, Warren also helped create the Consumer Financial Protection Bureau.
In a series of tweets, Warren praised Biden’s choice and congratulated Yellen. She called Yellen an “outstanding” selection as she was “tough, smart, and principled.” Then, she sent a farewell volley to outgoing Treasury Secretary Steven Mnuchin. Warren tweeted: “For the past four years, Secretary Mnuchin has catered to the wealthy and well-connected while struggling families and small businesses were left behind. I’d look forward to working with Secretary Yellen to strengthen our economy, tackle inequality, and protect consumers.”
Experts expect Yellen, being a labor economist, to strongly advocate fiscal support. Raymond James Washington analyst Ed Mills believes Yellen can be tough on enforcement. While serving as Fed chair, she oversaw bank stress tests and stood up against Wells Fargo. He’s okay with the nomination “if the result is less partisan, more focused on economic recovery, and someone the market is comfortable with. Thus, he sees Yellen as a positive development for the market and the economy.
As Yellen served at the Fed, expect a renewed collaboration between the two agencies. Meanwhile, there are those who feared that her previous stint makes her too friendly with the Fed. But, Knapp believes Yellen isn’t the meddlesome kind.
Yellen might need to address Mnuchin’s decision to let Fed emergency programs end by December 31. Fed chairman Leon Powell expressed his objections to the directive. He preferred credit facilities open even as lending facilities remained underutilized. Yellen may be able to reverse this decision once she sits.
With the government taking a lot of debt due to the pandemic, the Fed and the Treasury will need to work closer. “We have so much debt now there’s going to be some level of coordination that didn’t exist prior to this. I think she will be respectful of the Fed. Bottom line, it didn’t matter who was sitting in that seat. You were going to end up with complicity between the Fed and Treasury,” said Knapp. With the current deficit at $3 trillion, Knapp says it’s like US recovery efforts after World War II.
Getting Congress On Board
As a labor economist, Yellen will likely advocate more spending to revive the economy. She said in a September 28 interview that “There is a huge amount of suffering out there. The economy needs spending.” Then, she said recovery will be harder if Congress won’t help small businesses and create jobs.
Confirmation is another story. Democrats are facing a weaker majority in the House. Meanwhile, the Senate majority hangs in the balance. A January runoff in Georgia will determine the final two seats in the Senate. Whichever party gets the seats will get the Senate majority. Yellen will face an easier road to confirmation if the Dems win. She did enjoy bipartisan support during her confirmation as Fed chair in 2014 and as vice-chair in 2010.
Watch this as Ayman Mohyeldin of MSNBC reports a breaking story that Joe Biden will nominate Janet Yellen for Treasury Secretary:
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