Government Lending

Yellen approved as Treasury Secretary in historic vote

First female secretary will push Biden's economic agenda

The U.S. Senate officially appointed Janet Yellen as Treasury Secretary on Monday, ensuring the 74-year-old will be the first woman to lead the department in its more than 230-year history.

As part of Yellen’s team, the Treasury also named Natalie Wyeth Earnest as counselor to the Treasury secretary for strategic communications. Mark Mazur was named as deputy assistant secretary for tax policy in Treasury’s Office of Legislative Affairs.

Aruna Kalyanam was named deputy assistant secretary for tax and budget in the Office of Legislative Affairs.

Yellen was unanimously approved by the Senate Finance Committee last week, a 26-0 vote that left little doubt she would pass through the Senate to become Treasury Secretary.

“I think this is a great way to start the new year, with a unanimous vote on behalf of someone who I believe may in fact be the most competent, qualified secretary of the treasury we have ever had,” said committee member Senator Debbie Stabenow.

Ensuring Americans have a “competitive economy” will be Yellen’s primary focus, she told lawmakers last week. Her appointment comes at a pivotal time in the forthcoming presidential administration, as President Joe Biden unveiled his $1.9 trillion COVID-19 relief package earlier this month.

The plan has received both praise and scrutiny, as the national debt under President Trump already exceeded the annual output of the country’s economy, around $21.6 trillion.

In addition to overseeing and aiding in the logistics of the relief package, Yellen said she will play a key role in pushing the Biden administration’s economic agenda on Capitol Hill. It’s vital, she said, that lawmakers are aggressive in distributing aid to avoid an even longer recession.

“Economists don’t always agree, but I think there is a consensus now – without further action, we risk a longer, more painful recession now and long-term scarring of the economy later,” Yellen said prior to her Senate Finance Committee hearing.

Biden said in November that he planned to choose a candidate that would appeal to all camps within the Democratic party.

As Federal Reserve ChairYellen worked to bring stability to the economic market in the wake of the housing crisis of 2008. Yellen oversaw a program to sell Treasury and mortgage bonds that the Fed had purchased to stimulate the economy.

Jerome Powell, to whom Yellen handed the reigns as Federal Reserve chief three years ago, has pledged to keep rates low while Yellen oversees government spending to lower joblessness and prevent a widening in wealth inequality.

Though Yellen doesn’t have a reputation as an aggressive sheriff, she has flexed regulatory muscle in the past. In her last act as head of the Federal Reserve in 2018, Yellen slapped Wells Fargo with a $400 million penalty, punishing the bank for opening accounts in customers’ names without their knowledge. Yellen also delivered sanctions to the bank’s executives. 

Yellen as Treasury Secretary is unlikely to prioritize removing the GSEs from conservatorship, though that possibility was already fading.

In the final days of the Trump administration, the Treasury Department and the Federal Housing Finance Association agreed not to restructure the taxpayers’ stake in Fannie Mae and Freddie Mac.

However, the FHFA and Treasury did decide to allow Fannie Mae and Freddie Mac to retain more of their earnings. The move by former Treasury Secretary Steven Mnuchin and FHFA Director Mark Calabria infuriated Democrats. It’s possible Yellen and the Biden administration could try to unwind elements of that agreement.

Yellen made headlines in 2014 by delivering a one-minute speech to the House Financial Services committee outlining the risks associated with the GSEs and her plan for reform. 

“I think we still have a system that has systemic risk, that government funding remains critical to the mortgage sector, and I think to get the housing market back on its feet,” she said. “It’s important for Congress to put in place a new system and to explicitly decide what the role of the government should be in helping the housing sector.”

In that presentation, she pleaded with the HFS to “deal with a reform of the GSEs.”

“There are a variety of ways to do it,” she said. “But I think the government should make its intended role more explicit and make sure that whatever entities are set up to deal with housing finance. Don’t create systemic risks to the financial system.”

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