Financial Times: Janet Yellen is the perfect woman right now

It is almost impossible in this time of political polarization to find a secretary of the treasury who satisfies everyone. But Joe Biden did very well because the President-elect of the United States did just that by electing Janet Yellen, the former chairman of the Federal Reserve, for the post.

A chef Stable and modest, it makes data-driven decisions and enjoys the trust of progressives as well as many conservatives. It has received accolades from economists of all stripes, from Joseph Stiglitz to Kenneth Rogoff. It will be very useful to you in Washington.

“The problem with Janet, and one of the reasons the markets and the workforce have always loved her, is that she’s not an ideologue.“said Michael Greenberger, a law professor at the University of Maryland who worked on derivatives market regulation under the Clinton administration, when Yellen was chairman of the Council of Economic Advisers.”He takes his time, studies all the information and when he speaks what he says is almost always incontrovertible because it is very factual“.

That said, Yellen has her own deep beliefs that will influence how she runs the Treasury Department. First and foremost is your belief in the human impact of the economy. As she told me in January 2014 after being appointed Chairman of the Federal Reserve, central bankers have “an important role in public policy and a moral responsibility to participate in it.”

Her taskIn his view, it is not simply a matter of “fighting inflation or monitoring the financial system. try to help ordinary families recover and create a job market where people can feel secure, work and prosper. “

As the daughter of a family doctor in the working-class neighborhood of Bay Ridge, Brooklyn, who grew up watching her father treat longshoremen and factory workers from his home office (they paid $ 2 to be seen or not, depending on whether they were employed), has a deep understanding of the wider social effects of unemployment. According to her, “the economy should be about taking care of real people”. What could be more appropriate in the era of the pandemic by Covid-19 ?

In fact, he is the perfect person to help define and implement Biden’s ideas on the “solidarity economy,” whose aim is to prioritize work in areas such as health care, education and childcare. Even if these jobs they require the same skills that are unlikely to be replaced by technology – like human empathy, touch, and caring. they are often undervalued and underpaid.

But not always, as any wealthy person who hires a babysitter knows. After going through the experience of hiring a caregiver for their own child, Yellen and her husband, economist George Akerlof, wrote a much talked about article explaining why companies don’t always cut wages. even if there is a surplus of work. “When you hire a babysitter, the question you ask yourself is: ‘What’s the best for my precious son?“And do you really want someone who thinks that your goal in life is to minimize the amount you spend on your child?”

The answer is no. His article have shown that wages can be much higher than expected when human emotions are valued. It turns out that Rational Parents can behave very differently from Rational Man. This knowledge will become more and more relevant, given the digital switch-over and how it will move knowledge workers higher up the job hierarchy and possibly create more demand for “essential” workers in heart and hand.

Yellen’s other deep conviction is that economic policy should focus more on ordinary people than on Wall Street. Steven Mnuchin, the outgoing Treasury Secretary, made his job more difficult by deciding to allocate $ 455 billion of unspent funds from the Coronavirus Relief, Relief and Economic Security Act (CARES) into an account from which he Yellen will need permission from Congress to use it.

But her new post will also make her head of the Financial Stability Oversight Board (FSOC). This will give you a ton of power to reverse the Trump administration’s deregulation efforts without having to ask Congress for anything.

The FSOC brings together nine of the leading banking and market regulators, from the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to the Federal Housing Finance Agency (FHFA) and the Office of Financial Investigations (OFR), a leading systemic risk analysis agency that has been gutted by President Donald Trump. As Chairman of the FSOC, Yellen will be in a good position to define the nature of future regulations.

You can call meetings whenever you want and start implementing some of the Dodd-Frank regulatory standards that have been undermined. In fact, I bet you’ll be working very closely with Gary Gensler, Biden’s financial market adviser and former CFTC strict guard, and the current chairman of the Federal Reserve, Jay powell, with whom you have a good relationship, to achieve this.

This will be a good step at a time when leverage and systemic risk in the financial system, especially from non-bank entities such as private equity, are extremely high. Regulation of financial markets may be even more important than political momentum for greater fiscal stimulus, because investing money in a system that will channel it to unproductive places will not help ordinary people.

We need to move towards an economy based more on employment and income growth than on asset price bubbles. I can’t imagine anyone better than Yellen to make it happen.