While President-elect Joe Biden's choice of Janet Yellen for treasury secretary surprised practically no one, the choice of the former Federal Reserve Chair is sparking some rigorous debates among economists, Wall Street analysts, and commentators. With a political pedigree stretching back to the Clinton administration, Yellen has no shortage of experience to pick through for signs of what's to come.
She served as a Federal Reserve Board governor, chair of the White House Council of Economic Advisers, and president of the Federal Reserve Bank of San Francisco before becoming the first female Fed chair in history. If Congress approves her nomination, she will become the first woman to serve as treasury secretary in the position's 231-year history.
Among progressives, Yellen has gotten plaudits for her management of the economy in the aftermath of the Great Recession, keeping interest rates low and maintaining the flow of quantitative easing. Senator Elizabeth Warren of Massachusetts, who expressed interest in the treasury secretary role herself, tweeted that Yellen was "one of the most successful Fed Chairs ever" and had stood up to Wall Street banks.
Economist and columnist Paul Krugman was similarly effusive.
Some on Wall Street, however, anticipate that Yellen's policies will hew more closely to that of her predecessor, Steve Mnuchin.
"She's a Wall Street-first treasury secretary," Michael Lee, analyst and founder of Michael Lee Strategy, told Cheddar. "She's uber-political and the market likes it, and the big banks like it because she's going to do what it takes to push stocks higher."
Lee, who is critical of a heavy-handed Federal Reserve, sees parallels between now and Yellen's transition to chairing of the Fed back in 2014 when she presided over the continuation of crisis-era policies.
"All the extraordinary things that [Ben Bernake] did coming out of the financial recession, she just let them run way beyond what she should have," he said. "I think she will let all the extraordinary things that Steven Mnuchin did during the coronavirus run past their sell-by date."
Specifically, he thinks Yellen will revive the special purpose vehicles that have served a crucial role in distributing business loans and keeping financial markets buoyed. Mnuchin allowed several to discontinue.
Chris Markowski, stock market analyst and host of Watchdog on Wall Street echoed the idea that Yellen won't stray far from Trump's treasury secretary.
"She's really not much different than Steve Mnuchin," he said. "She's been around Washington, DC, a lot longer than Mnuchin, but they're both believers in printing money. It's very much a Keynesian mindset."
The Wall Street analysts share the view that monetary policy should be more constrained in order to avoid the "Japanification" of the economy, in which debt becomes so burdensome that the economy stagnates.
However, both Republican and Democrat policymakers have come to embrace a more aggressive Fed in the wake of the Great Recession.
"As The Who once sang 'meet the new boss, same as the old boss,'" Markowski added.
In general, though, Markowski is skeptical about how much impact treasury secretaries have on the economy. It really depends, he said, on how much Yellen gets involved in helping Congress negotiate the next stimulus package, a role that Mnuchin embraced early in the pandemic.
"During COVID, was Mnuchin involved with a lot of the negotiations trying to bridge the gap between the Senate and the House? Yeah, he was, and I think she might have to play that part as well," he said.
Tom Kozlik, head of strategy and credit at Hilltop Securities Inc., anticipates that Yellen will act ambitiously in her new role, despite this being a more explicitly political position than her prior jobs at the Fed.
"It goes without saying that former fed chair Yellen is extraordinarily qualified," said Kozlik. "She will be a very active treasury sec. and leader in Washington — a comparable [situation] is probably how Hank Paulsen shepherded legislation during the financial crisis."
