WASHINGTON — President-elect Joe Biden has chosen former Federal Reserve Chair Janet Yellen to serve as Treasury secretary, a pivotal role in which she would help shape and direct his economic policies at a perilous time, according to a person familiar with the transition plans.
Yellen, who is widely admired in the financial world, would be the first woman to lead the Treasury Department in a line stretching to Alexander Hamilton in 1789. Her nomination was confirmed to The Associated Press by a person who spoke on condition of anonymity to discuss Biden’s plans.
If confirmed as Treasury secretary, Yellen would inherit a shaky U.S. economy, weakened by the pandemic recession and now in the grip of a surging viral epidemic that is intensifying pressure on businesses and individuals. Concern is rising that the economy could slide into a “double-dip” recession this winter as states and cities reimpose restrictions on businesses and consumers stay home to avoid contracting the disease.
A path-breaking figure in the male-dominated economics field, Yellen, 74, was also the first woman to serve as Fed chair, from 2014 to 2018. She later became an adviser to Biden’s presidential campaign in an unusual departure for a former Fed leader.
“She will bring to the role deep economic and policymaking expertise, national and international stature, and a ... personal commitment to fostering strong labor market conditions that draw in marginalized workers,” said Krishna Guha, an analyst at investment bank Evercore ISI.
The Treasury post would add another new chapter to Yellen’s varied career in financial policymaking. She would represent the administration in global financial affairs and lead a sprawling department whose responsibilities range from the government’s finances and tax collections to currency markets, bank regulation and the printing of money.
Yellen would also take on the formidable task of helping negotiate economic policy with Sen. Mitch McConnell, the Kentucky Republican who will remain Senate majority leader if his party wins at least one of two Senate runoff elections in Georgia in early January. Those talks would likely focus most urgently on a new stimulus package that most economists say is vital to sustaining an economic recovery.
Jaret Seiberg, a banking industry analyst at Cowen, described Yellen as a “pragmatist” who would likely pursue a relatively moderate path on banking regulation. Stock markets, which had already risen Monday, rose further after news leaked of her selection.
Yellen enjoys a close working relationship with Jerome Powell, who succeeded her as Fed chair, something that would likely improve coordination between the Fed and the Treasury and perhaps result in additional support for the economy. Powell and the current Treasury secretary, Steven Mnuchin, last week publicly disagreed over Mnuchin’s decision to cancel several Fed emergency lending programs at the end of this month.
“She will bring to the role deep economic and policymaking expertise, national and international stature, and a ... personal commitment to fostering strong labor market conditions that draw in marginalized workers."
Yellen has consistently favored further stimulus spending for the economy, including for state and local governments, which she has said need “substantial support” to avoid further job cuts. Such rescue aid has been a key sticking point in congressional negotiations on a stimulus package, with McConnell resisting the larger amounts sought by Democrats.
Before leading the Fed, Yellen was its vice chair for four years and before that was president of the Federal Reserve Bank of San Francisco for six years. Earlier, under President Bill Clinton, she led the president’s Council of Economic Advisers, after serving a stint on the Fed’s board.
Yellen is well known on Capitol Hill after years of testifying as Fed chair to Senate committees about the economy and interest rate policy. During those years, she frequently clashed with Republican lawmakers who accused her of keeping rates too low for too long after the 2008 financial crisis. Some of them charged that Yellen and her predecessor, Ben Bernanke, had elevated the risk of runaway inflation and asset bubbles that could destabilize financial markets.
None of those fears came to pass. On the contrary, under Bernanke and Yellen — and later, under Powell — the Fed’s more difficult challenge became raising inflation merely to the Fed’s annual 2% target level. It has yet to do so consistently.
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