Janet Yellen is poised to become the most economically powerful woman in the world. Again.
Bloomberg News described her in exactly that way in October 2013, when President Barack Obama nominated her to succeed Ben Bernanke as Federal Reserve chair, a role she would hold for four years during two administrations. This time, Yellen is President-elect Joe Biden's pick to serve as the next Treasury secretary.
It's a smart and historic pick for any number of reasons. For one, she's poised to be the first person ever to have been chair of the White House Council of Economic Advisers, Fed chair and Treasury secretary. She also stands to be the first woman to lead the Treasury, breaking yet another barrier in economics as she has time and again throughout her distinguished career.
Yellen's previous experience also suggests that the Biden administration wants a Treasury that works hand in glove with the Fed to bring the U.S. economy back to where it was before the coronavirus pandemic. The president-elect's decision to bring in a highly regarded central banker upon taking office — and amid an economic crisis — echoes Obama's move to name Timothy Geithner, the president of the New York Fed at the time, as his first Treasury secretary in 2009.
A more pessimistic view is that the plan to nominate Yellen could be taken as an early signal that Biden doesn't expect much cooperation on his economic agenda from what could be a Republican-controlled Senate.
Recall that Yellen, 74, was the Fed's vice chair from 2010 to 2014, then took over as chair from Bernanke until she was succeeded by Jerome Powell in 2018. That means she was either the No. 1 or No. 2 decisionmaker at the central bank during the entire period of Obama's presidency in which there was a divided government. From 2011 through 2015, even during a relatively tepid economic recovery, the U.S. budget deficit narrowed each year, forcing the central bank to carry the weight of the world's largest economy on its shoulders, engage in novel asset-purchase programs and hold off on normalizing interest rates for far longer than policymakers anticipated.
This time around, the entirety of Fed leadership has been outspoken during the COVID-19 pandemic about the need for additional fiscal stimulus to prop up the economy as virus outbreaks intensify across the country. Yet Congress has stalled for months, first ahead of the election and now as President Donald Trump refuses to concede. Yellen called fiscal relief "essential" last week during the Bloomberg New Economy Forum, while Powell reiterated earlier this month that "continued support from both monetary and fiscal policy" will be needed to get the U.S. back to levels of activity and employment from the start of the year.
Powell and Yellen have a long history of working together, and if any economic leaders can usher in an era of sustained monetary and fiscal policy coordination, it's the two of them. Part of the reason Powell was nominated to serve another term on the Fed, after initially being appointed in 2012 to fill an unexpired governor term ending Jan. 31, 2014, was to provide at least some continuity during the transition from Bernanke to Yellen. During Powell's first year as Fed chair, he directly followed in Yellen's footsteps with quarterly interest rate increases of 25 basis points. There's little question that they're on the same page.
