President-elect Joe Biden will nominate former Federal Reserve chair Janet L. Yellen as his treasury secretary, according to three people in close communication with aides to the president-elect.
On Monday afternoon, Biden adviser Jen Psaki wrote on Twitter: “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.”
If confirmed, Yellen, 74, would bring decades of experience as a regulator and economist to the crucial post, although she has never worked at the Treasury Department. She would have a rare public service resume for a treasury chief, having served as Fed chair, president of the Federal Reserve Bank of San Francisco and a top economic adviser to President Bill Clinton. She was confirmed to lead the Fed in 2014 by a vote of 56 to 26. Eighteen senators didn’t vote.
Her nomination would be one of the early signs that shows Biden plans to lean on experienced Washington veterans to lead the government next year. On Tuesday, he is expected to announce he will nominate Antony Blinken as secretary of state; Alejandro Mayorkas as secretary of the Department of Homeland Security; and John Kerry as climate czar, among other top positions.
Yellen would oversee the Treasury Department at one of the most perilous moments for the American economy in decades. The pandemic caused an economic contraction from which the nation has not yet recovered, and full distribution of a vaccine appears months away.
Yellen and the rest of Biden’s incoming team will inherit an economy badly bruised in several key sectors and still reeling from the coronavirus, as well as expected political opposition to their legislative agenda in a Senate probably controlled by Republicans. The Treasury Department runs tax policy and issues government debt, two issues that could be flash points in Biden’s first years in office. The budget deficit eclipsed $3.1 trillion in 2020, and Republicans have recently signaled they want to dramatically cut back on spending at a time when Biden says large levels of government support are needed to bring the economy back to life.
“She’s walking into a nightmare. People are going to be getting evicted, losing their houses, and state and local governments are facing disastrous situations,” Dean Baker, a liberal economist, said. “These are horrible problems, but Yellen has been around so she knows both her economics and Washington. If there’s a way to get through this, she’s as good as anyone."
Yellen told The Washington Post in August that it was “urgent” to enact more fiscal stimulus in response to the downturn. She said she was especially worried about cities and municipalities running out of money and low-income workers suffering permanent scars from being unemployed for a year or more.
In her time in the Clinton administration, Yellen was supportive of efforts to balance the federal budget, but she has become an advocate of spending more money now that interest rates are at historic lows, making it cheap for the U.S. government to borrow money.
“Under current conditions, I think we can afford to increase federal spending or cut taxes to stimulate the economy if there’s a downturn,” Yellen said in January at the American Economic Association annual meeting, where she served as president.
Yellen’s term as chair of the Federal Reserve expired in 2018, and President Trump replaced her with Jerome H. Powell, who remains the Fed chair. At the Fed, Yellen helped oversee an economic expansion under the Obama administration but faced some criticism for backing interest rate increases in his second term, which some economists believe suppressed demand before the economy had fully recovered. Trump had considered reappointing Yellen to serve as Fed chair for another four-year term, but some on Trump’s economic team felt she did not embrace the president’s deregulatory policy. In an August 2017 speech, Yellen had called for regulators to stay vigilant and closely monitor risks in the financial system.
Like many of the other announced members of Biden’s incoming team, Yellen has long-standing ties in the Democratic Party and a resume filled with decades at the highest levels of public service. In addition to her service in the White House and Federal Reserve system, she has most recently worked as an economist at the Brookings Institution, a center-left think tank.
News of Yellen’s likely nomination was first reported by the Wall Street Journal. Yellen declined to comment for this story. A spokesman for the Biden transition also declined to comment.
Lael Brainard, who served at the Treasury Department under Obama, had emerged as an early front-runner for the Treasury position. Brainard is currently a governor on the Federal Reserve Board, which means appointing her to Treasury would have forced the Biden team into another battle with a recalcitrant Senate.
The pick also reflects Biden’s attempts to bridge the disparate wings of the Democratic Party. The president-elect told reporters last week of his treasury selection: “It’s someone who will be accepted by all elements of the Democratic Party, from the progressive to the moderate coalitions.”
Some on the left have dinged Yellen for what they see as her efforts to slowly but prematurely raise interest rates before the economy was fully recovered. Nathan Tankus, research director at the left-leaning Modern Money Network, said those moves were “critical mistakes” during her tenure at the Federal Reserve, although he praised her competence and expertise. “Some of her bad decisions meant weaker wage growth and higher unemployment for Americans, especially African Americans and Latinos,” Tankus said.
Close allies of Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) have signaled to Biden’s team that they could accept Yellen as treasury secretary, according to two people who spoke on the condition of anonymity to share details of private conversations. The left made it clear that they preferred Warren or former Obama administration official Sarah Bloom Raskin, who is seen as more liberal than Yellen, for treasury secretary. But people close to Biden’s team have said for months that Warren had little chance of securing the treasury secretary position.
Biden is yet to name his appointees to run the Office of Management and Budget or the director of National Economic Council, among other key economic posts.
The incoming treasury secretary will work closely with Powell on the country’s ongoing economic response to the covid-19 crisis. That could include a revamp of emergency facilities propped up by the Fed and Treasury at the start of the pandemic — programs which the current treasury secretary, Steven Mnuchin, abruptly announced would shut down at the end of the year.
Roberto Perli, a former Fed official and founding partner and head of global policy at Cornerstone Macro, said Yellen’s long career at the Fed would be crucial at a time of such close collaboration between the Fed and Treasury. Claudia Sahm, a former Fed economist, touted the importance of Yellen's leadership at the central bank.
“It did matter, being a woman at the Fed and seeing a woman Fed chair,” Sahm said. “I am sure it will matter for many women at Treasury to see Yellen standing at the top of the house. Her position has meant so much to the women who are coming up the career path.”