WASHINGTON – President-elect Joseph R. Biden Jr.’s candidate for Secretary of the Treasury, Janet L. Yellen, will tell lawmakers during her ratification session Tuesday that the United States needs a number of solid fiscal stimulus measures to fight the pandemic is back on track and now is not the time to worry about the nation’s increasing debt burden.
Ms. Yellen’s support for a major stimulus package comes as Mr. Biden prepares to push through a $ 1.9 trillion relief plan once he takes over the presidency. If this is confirmed, Ms. Yellen will be responsible for guarding this package through Congress and overseeing its implementation.
“Neither the elected president nor I propose this aid package without appreciating the country’s debt burden. But with interest rates at historic lows, we can act the smartest right now, ”Ms. Yellen will say, according to a copy of her opening address audited by the New York Times.
It won’t be an easy task. Democrats hold a slim majority in Congress and Republicans have already raised concerns about Mr Biden’s plan and its impact on the budget deficit, which topped $ 3 trillion last year.
Ms. Yellen, a former Federal Reserve chairwoman, will argue that “the benefits will far outweigh the costs.” And she will present her job as two mandates: helping people stay afloat until the pandemic is over, and rebuilding the economy so Americans can better compete in a globalized world.
If this is confirmed, Ms. Yellen is expected to bring a very different perspective to the job than her predecessor, Treasury Secretary Steven Mnuchin. This includes Ms. Yellen’s approach to financial regulation and protecting the economy from systemic risk.
Two years ago, Ms. Yellen signed a letter to Mr. Mnuchin urging him not to move forward with plans to relax supervision of large financial companies, warning that doing so could jeopardize the stability of the American financial system.
Ms. Yellen’s request, which was also joined by Ben Bernanke, another former Fed Chairman, and former Treasury Secretary Jacob J. Lew and Timothy F. Geithner, went unheeded. Under the leadership of Mr. Mnuchin, the Financial Stability Oversight Council continued its plans to stop designating large non-bank financial institutions such as insurers and asset managers as threats to the financial system in order to overcome an important pillar of the post-financial regulatory era.
Now Ms. Yellen, named Treasury Secretary by President-elect Joseph R. Biden Jr., is ready to restore some of the Trump administration’s regulatory setbacks if she wins Senate approval.
Her confirmation hearing before the Senate Finance Committee on Tuesday is expected to focus largely on Ms. Yellen’s plans to revive a pandemic-hit economy. But she will also be under pressure to show Democrats and progressive groups that she is ready to end what they see as Mr. Mnuchin’s pampering on Wall Street.
For the past few weeks, Ms. Yellen and Wally Adeyemo, Mr. Biden’s candidate for Assistant Secretary of the Treasury, have been on a virtual audio tour of industry groups across Washington. According to those attending those sessions, the two emphasized the need to create “equitable growth” by using the tools of the finance department to fight climate change and regulating bodies like the F.S.O.C.
“There’s an emphasis on working people, racial justice and inequality, and that’s a good start,” said Lisa Donner, executive director of Americans for Financial Reform, an advocacy group who met with Ms. Yellen this month. “But it’s not enough to reverse things that the current finance department has done.”
Americans for Financial Reform, a left-wing organization that has been largely banned from the Treasury for the past four years, wants Ms. Yellen to give the FSOC a new direction that has the power to put large financial firms under stricter supervision. It was created by the Dodd-Frank Act of 2010 to prevent a recurrence of the events leading up to the financial crisis, when companies like insurance giant AIG placed risky bets out of the reach of regulators and then had to be bailed out by taxpayers.
His power was gained under the Trump administration, which exempted AIG and three other financial firms from stricter supervision.
Americans for Financial Reform has urged Ms. Yellen and transition officers to revoke F.S.O.C. to call climate change a “systemic risk” and to create instruments to limit the leverage effect in hedge funds that are only slightly regulated.
Ms. Yellen probably has a new regulatory approach in mind. She called for a “new Dodd-Frank” last year and argued over one Brookings Institution event that existing laws were insufficient to resolve problems in the shadow banking sector that emerged when the pandemic caused severe market turmoil.
The former Fed chairman has also shown that she is willing to punish banks for wrongdoing if justified. In 2018, on Ms. Yellen’s last day at work, the Fed asked Wells Fargo to replace four members of its 16-person board of directors for failing to properly oversee the bank in a fraud scandal.
But Ms. Yellen’s experience at the Federal Reserve and her understanding of the banking system have cleared the concerns of some in the financial sector who might otherwise fear that a future democratic government will quickly introduce new rules. At meetings with financial services groups, Ms. Yellen has indicated that helping to design and monitor the Biden government’s economic relief efforts will initially be her top priority.
“She is very knowledgeable about the banking system. She is familiar with the strength and role of the big banks, including the positive role they have played over the past year,” said Kevin Fromer, executive director of the Financial Services Forum, a lobby group who also met with Mrs. Yellen month ago.
Ms. Yellen is forced to withdraw from financial matters involving certain financial institutions due to an ethics agreement she signed on disclosing paid speeches she has given to large corporations and Wall Street banks since leaving the Federal Reserve in 2018 are Ms. Yellen, who was released on New Years Eve, earned more than $ 7 million in calling fees from companies including Goldman Sachs, Citigroup, and Citadel.
Jeff Hauser, the director of the Revolving Door Project, asked Ms. Yellen to make the content of her speeches public. However, he said it was less worrying than some of the consulting work Mr Biden’s other nominees have done in recent years for companies like Blackstone, a giant Stephen Schwarzman wealth manager, and data mining company Palantir.
The Biden transition team declined to post videos or transcripts of the speeches, finding that they usually took part in non-written discussions about the economy.
“Yellen did not make any prepared comments during her presentations. Most of them were armchair conversations, answering questions from a moderator and some of them were reporters, ”said Sean Savett, a spokesman for the Biden transition. “She has already signed ethical agreements governing her relationship with these companies, and of course she will abide by any reasonable denials.”
Republicans on the Senate Finance Committee could question Ms. Yellen about speaking fees, but Democrats are unlikely to push her on the matter.
“This is the worst economic crisis in 100 years, and no one is better qualified than Secretary-Designate Yellen to lead an economic recovery,” said Senator Ron Wyden of Oregon who will chair the finance committee when the Democrats take control of the Senate take over. “It deserves credit for the longest economic expansion in our history, which lasted until the pandemic.”
The verification process is expected to be relatively smooth. Senator Charles E. Grassley of Iowa, currently Republican Treasury Committee chairman, has spoken favorably of Ms. Yellen since Mr. Biden selected her for the job.
Mr. Grassley said on Friday He spoke to Ms. Yellen and emphasized the importance of working with the oversight of Congress and expressed concern that tax hikes and more regulation would slow the economic recovery.
In 2014, the Senate confirmed that Ms. Yellen is Fed Chair with 56 to 26 votes.
While Ms. Yellen, a trained economist, has a deep understanding of monetary policy, the portfolio in the finance department is huge. She is likely to have questions about America’s economic relationship with China, her position on sanctions policy on Iran, and her thoughts on tax policy. She might even ask herself questions about sensitive issues the Treasury Department is dealing with, such as: For example, whether Harriet Tubman should be the face of the $ 20 bill, an Obama administration initiative that Mr Mnuchin declined.
Before Ms Yellen’s hearing, several groups suggested that they encourage a change in tone and staff in the Treasury. Mr. Mnuchin ran the department with a small staff and was most receptive to executives of large banks and corporations.
Luz Urrutia, executive director of the Accion Opportunity Fund and Opportunity Fund, said she got off hopefully after meeting Ms. Yellen last month about financial institutions for community development. The Trump administration has repeatedly tried to cut funding for the CDFI Fund’s Treasury-monitored grant programs. Ms. Yellen told the group that she wanted to expand the lending capacity of CDFIs so that they could better serve minority communities.
“They did not believe that CDFIs have the level of impact and ability to serve these communities,” Ms. Urrutia said of the Trump administration. “There is a big difference between Yellen and the current government.”
In her testimony, Ms. Yellen will make it clear that promoting greater equality is a priority.
“People worry about a K-shaped recovery, but long before COVID-19 infected a single American, we lived in a K-shaped economy where wealth was built on wealth while working families kept falling behind,” she will say . “This is especially true for people with color.”