The Dream Team at the Treasury


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I have long been a huge Janet Yellen fan. I did the first interview with her after she was made Fed chief, during which I learned much about her values as an economist and a person. The upshot? As I explore in my Monday column, she’s exactly who you want heading up the American economy at this moment.

For starters, she’s got empathy. As Swamp readers will know, I’m in complete agreement with people like Michael Sandel and David Goodhart, who believe that the meritocratic rat race has disproportionately rewarded knowledge workers to the detriment of everyone and everything else. Basically, we have too much IQ and not enough EQ.

Yellen has both in spades. She’s highly data driven, yes, but she is also someone who believes deeply that it’s the job of the economist and policymaker to help real people. Not to think about human beings as algorithmic inputs in a mathematical model (there are too many former Treasury secretaries who’ve thought that way), but to think about the real, on the ground human impact of things such as unemployment, inequality, and asset bubbles. 

I also think that as a labour economist who is concerned with Main Street wellbeing, she’s the right person to address systemic risk in the markets that has come from financialisation. I suspect we are going to see some big regulation coming down the road.

As head of the Financial Stability Oversight Board, she’ll have tremendous leeway to roll back some of Donald Trump’s deregulation, refund various important agencies such as the Office of Financial Research (a key risk analysis body that Trump destroyed), and also set the tenor of what’s to come. Given some of her public statements, I suspect that she’s going to be looking very closely at the risk held by non-bank entities, in particular private equity. 

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She’s also got some terrific people around her. Gary Gensler, the former Commodity Futures Trading Commission head who is now Joe Biden’s chief financial market adviser, is being talked about as a deputy Treasury secretary. I’ve also profiled him, and couldn’t imagine a better person for that job, either — he’s been up at the Massachusetts Institute of Technology studying decentralised technologies and the financial markets recently, a very important topic given the rise of cryptocurrencies such as bitcoin, and also the growing strength of the digital renminbi. Roger Ferguson, someone who cares deeply about economic and racial justice, as head of the NEC, is also a great pick.

Bottom line, Biden seems to be hitting it out of the ballpark so far in terms of his economic team. When Ed is back from holiday this week, I hope he’ll share more of his thoughts, as a foreign affairs expert, on Biden’s secretary of state and security picks.

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Recommended reading

  • One of my favourite economic thinkers, Richard Kozul-Wright, and Jeronim Capaldo, summarise very well the challenges that Joe Biden faces and how we can leverage the pandemic to get to a better place.

  • And in the FT, my colleague Sarah O’Connor sounds an important alarm about how the work-from-home trend as a result of Covid could also lead to a whole new wave of white collar outsourcing.

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