Shortly after Joe Biden selected Kamala Harris as vice president in August, former Federal Reserve chairwoman Janet Yellen briefed the couple about the coronavirus pandemic-induced slump and what they could do about it.
One person who was briefed on the interview, Ms. Yellen told the Democratic Ticket that interest rates are low and likely to stay there for a long time, which creates considerable fiscal space for new incentives and investments.
The intervention was well received by Mr. Biden and Ms. Harris, whose economic plan includes billions in government spending. Now Ms. Yellen, 74, is being nominated by Mr. Biden as the next US Treasury Secretary and is giving her a second act at the height of American economic policy.
Ms. Yellen is a well-known figure both nationally and internationally, having headed the US Federal Reserve for four years between 2014 and 2018. This fits well with Mr Biden’s desire to fill his cabinet with competent institutionalists following the disruption caused by Donald Trump.
“Janet Yellen’s appointment is widely welcomed, and rightly so, by economists, overseas officials and markets, all of whom consider her a very seasoned policy maker who has provided years of stability,” said Mohamed El-Erian, President of the Queens’ College at Cambridge University and Chief Economic Advisor to Alliance.
Ms. Yellen “understands the importance of close national and international policy coordination,” added El-Erian.
She is smart, tough, and principled
If Mr. Biden carries out her nomination and it is approved by the Senate, Ms. Yellen will take over the leadership of US economic policy at a crucial time.
The recovery from the initial effects of the coronavirus is showing clear signs of slowing amid waning fiscal support from Congress as new infections emerge in many states. Although a vaccine is in sight, many economists fear permanent damage to companies and the labor market that could weigh on economic performance for years.
And while the financial markets appear to be in healthy shape, Mr Trump’s finance department, led by Secretary Steven Mnuchin, has just shut down some of the Fed’s emergency facilities, creating a rift with the central bank, Ms. Yellen in unique Way can repair.
“I think she will do her best to get as many of these programs back online as possible,” said Eric Stein, chief investment officer, fixed income for Eaton Vance. “Given Yellen’s background at the Fed, her views will be very much in line with the Fed and she will want the Fed to be able to lend as much credit as possible to various sectors of the economy.”
Ms. Yellen was born and raised in Brooklyn, New York, graduated from Brown University and received her PhD in economics from Yale University, where she specialized in the labor market.
Her government career led her to the Fed – where she met her husband, George Akerlof, a fellow economist and Nobel Prize winner – and eventually to the White House as chairman of the Clinton Council of Economic Advisers.
She later returned to the US Federal Reserve as President of the Fed from San Francisco and later as Vice Chairwoman of the Fed in the years leading up to the financial crisis and the start of the Great Recession.
When Barack Obama selected her to replace Ben Bernanke as Fed chair in late 2013, Barack Obama joked that she was “tough, not just because she was from Brooklyn,” and credited her with raising the alarm about the housing bubble early on.
“She doesn’t have a crystal ball, but she has a good understanding of how markets and economics work, not just in theory but in the real world,” he said.
During her tenure as Fed Chair, Ms. Yellen led the start of the post-crisis tightening of monetary policy and initiated a cycle of rate hikes that she approached cautiously and paused along the way.
For some liberal economists, even these moves were overly hawkish, and with hindsight the Fed rejected them on the grounds that the economy could have benefited from continued easy money without causing a dangerous spike in inflation.
During that time, Ms. Yellen’s tenure at the Fed was marked by other changes that continued under her successor, Jay Powell, including a growing focus on income inequalities and the roles of gender and race – issues that the central bank traditionally ignored in policy making.
Mr Trump even considered offering Ms. Yellen a second term as Fed chair, but declined after his aides found it best to choose his own candidate. The president also asked if Ms. Yellen, who is 5 feet 3 inches, was too short for the job, according to the Washington Post.
After leaving the Fed, Ms. Yellen held a position as a fellow at the Brookings Institution, a think tank in Washington, occasionally lamenting the US president’s attempts to undermine the central bank’s independence and the government’s lack of global economic leadership .
In an interview with the Financial Times in October 2018, Ms. Yellen said that Mr. Trump’s relentless verbal assaults “destroyed the legitimacy and stature of institutions traditionally trusted by the public,” adding, “I am who Opinion that this ultimately undermines the social and social problems economic stability. “
As Finance Minister, Ms. Yellen will be forced to enter the political struggle more than in her previous roles. Despite having faced frequent harassment by Congress as a Fed official, including her own confirmation hearing, she now has to negotiate economic stimulus measures with recalcitrant Republicans and defend them from a deeply polarized American electorate.
Crucial to her appointment to the Treasury Department is the fact that she has successfully made a name for herself in the progressive wing of the Democratic Party in recent years – more so than Lael Brainard, a current governor of the Fed who is also a leading candidate for the Treasury Department was.
In addition to highlighting America’s ability to run deficit spending when she called Mr. Biden and Ms. Harris in August, Ms. Yellen also wrote a comment in the New York Times that month with Jared Bernstein, a member of Biden Brett’s transition counseling. that is appealing to large-scale stimuli.
“If the senators still can’t resolve the stalled negotiations. . . Millions of Americans in need will suffer – and the economy as a whole could deteriorate from its current slow pace of growth to no growth at all, ”they wrote.
On Monday, Ms. Yellen received a ringing endorsement from Elizabeth Warren, the Massachusetts Senator who is known for her very liberal views on economic policy and her tough stance on banking regulation.
Ms. Warren’s support suggests that, at least from the outset, there could be little left-wing backlash to her nomination like the one that former Treasury Secretary Tim Geithner has persecuted under Obama.
“She is smart, tough and principled. As one of the most successful Fed chairmen of all time, she has stood against the banks on Wall Street, including the fact that Wells Fargo has been held accountable for defrauding working families, ”Ms. Warren wrote in a tweet in which Ms. Yellen has been described as an “excellent choice”.
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