Biden Has Nominated His Treasury Secretary, And It Is Not Elizabeth Warren

President elect Biden is assembling his team of liberal economic advisors amidst the backdrop of an alarmingly high rate of unemployment and a pandemic-aided economic slump. Biden’s nominee for treasury secretary, Janet Yellen -- who served on the Federal Reserve’s policy making committee during the financial crisis of 2008 -- stands in line for another top economic policy, just in time to confront another crisis.

The extraordinarily talented Yellen served as President Clinton’s top economic advisor through the Asian financial crisis and again as Chair of the Fed in 2014, as the economy recovered from a devastating recession. She has now been deemed president elect Biden’s selection for treasury secretary, and, if confirmed, the leader who will be given the responsibility of rescuing our economy from the tightening grip of the surging pandemic. As instances of the virus spike, causing states to reimpose

business restrictions, the pressure on individuals and companies intensifies and the fear that we will suffer a “double dip” recession grows. This refers to the initial pass of a recession, followed by a short-lived recovery, that withstands yet another recession.

Nonetheless, trained observers of the United States economy see Yellen as wonderfully suited for the role. During a live interview for the Washington Post, Larry Kudlow, a top economic advisor of Trump’s White House, applauded Biden’s selection. Kudlow’s surprising praise for Yellen acknowledged his stance as a tax cutter, in juxtaposition with hers as more of a spender, but he admitted that Biden’s nomination was a “good idea” and that Yellen did a “decent job” chairing the federal Reserve.

Kudlow’s endorsement demonstrates how Yellen is the treasury secretary that will not startle Wall Street or, hopefully, alienate progressives. She emerged from the other contenders as a nominee who would cultivate broad support and be prepared to hit the ground running, lacking in-role training, amidst a crisis. Markets flourished throughout Yellen’s tenure as leader of the Fed, leaving her a well known quantity with an exemplary track record.

However, the power of the Fed, and Yellen’s former role, has been limited while interest rates are at zero, leaving the Treasury as the only game to be played in town. Yellen’s Treasury could use that fiscal ammunition to return the United States to full employment. Because Republican’s are expected to maintain their majority in the Senate, that fire power might be aimed at an infrastructure package designed to create jobs.

If you are fiercely progressive and maintain a critical view of corporations and big banks as I do, you may have favored Senator Elizabeth Warren for the role. We watched the Massachusetts senator lobby for the Treasury position where she might have had the authority to implement the vast structural change she discussed in the democratic primaries. Warren saw herself presented with the opportunity to rectify what are, in her opinion, mistakes made by the Obama administration’s response to the recession -- namely doing little to address underlying systemic issues for the most vulnerable populations. In the wake of a subprime mortgage crisis, progressives called on Obama to assist the defenseless. Hisefforts fell short, however, leaving millions of families to endure foreclosure.

Unfortunately Biden likely anticipated the swift opposition from Wall Street that would have trailed a Warren nomination, given some banking executive’s fear that she would implement more strident regulations on the financial sector. Warren welcomed this reputation in the primaries and touted reports that detailed the concern of top financial executives that she would win the nomination. Now these business world opponents are warning Biden that a Warren nomination would scare the markets, especially the bond market, into a precarious state. This is a daunting prospect for a President Elect preparing to ask Congress for a trillion dollar economic stimulus package.

Progressives can still be hopeful that our views will be heard by Yellen as leader of the Treasury. Shortly before wrapping up her tenure at the Federal Reserve, Yellen enforced unprecedented sanctions against Wells Fargo for “widespread consumer abuses”, debilitating the bank with penalties. This is evidence of Yellen’s willingness to confront corporate power and stand unintimidated by big banks. But Yellen is not some idealist who would attack Wall Street at every turn, Wells Fargo was just an especially bad actor. In the same term in which she dropped the hammer on Wells Fargo she also failed to object to adjustments that made financial regulations less burdensome.

Even if some of her past decisions give them pause, for the moment leading progressives have complimented Biden’s selection of Yellen. After her nomination was announced, Senator Warren took to Twitter to praise the choice, calling her “tough, smart and principled.” Former Labor Secretary Robert Reich tweeted “2 cheers for Yellen at Treasury, she’s not @SenWarren but she's not from the Street.” Progressives should note Yellen’s willingness to engage with Fed Up, a leftist group opposing interest rate hikes. The relationship they fostered moved the Central Bank’s position on inflation towards a slower rate of borrowing cost that was less burdensome to low income populations.

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https://www.forbes.com/advisor/investing/janet-yellen-treasury-secretary/