Janet Yellen Is Struggling At The Treasury Job She Never Wanted

"(Bloomberg Businessweek) -- It was supposed to have been a capstone. Instead, Janet Yellen’s stint as Treasury secretary threatens to become a stain on a storied career..The former Federal Reserve chair was recruited to help steer the US economy out of the pandemic by lending her gravitas and credibility to the Biden administration’s pursuit of a robust and lasting recovery. It took some arm-twisting to persuade her to take the job..Eighteen months later, Joe Biden’s presidency is in trouble, with inflation soaring to a 40-year high and Democrats on course for a wipeout in the midterm elections. The 75-year-old Yellen finds herself trapped in the inevitable blame game, fighting to keep her professional reputation intact..On May 31, Yellen took matters into her own hands and did something that caught the White House by surprise. She admitted to the American public on CNN that she “was wrong” about the path inflation would take. The administration had thus far been relentlessly trying to paint the surge in consumer prices as temporary..With her statement, Yellen broke ranks with Biden’s inner circle—which doesn’t include her—and exposed the dysfunction at the heart of an administration that’s botched its communications around the country’s economic problems. Americans haven’t felt this dismal about the nation’s—and their own—prospects since the recession of 1980, according to the latest reading of the University of Michigan’s gauge of consumer sentiment, while polls show the majority of voters disapprove of Biden’s handling of inflation..Some of Yellen’s travails come with the territory. US Treasury secretaries are supposed to take a leading role in formulating economic policy but at times wield less influence over important matters than the president’s own cadre of advisers. The job demands sharp elbows and assertive salesmanship, helpful in dealing with Congress. These are qualities frequently associated with Robert Rubin, Henry Paulson, and Steven Mnuchin, all of whom worked at Goldman Sachs Group Inc. before being tapped for the top job at Treasury, and not with a soft-spoken technocrat like Yellen, who’s accustomed to the more predictable and measured world of central banking..Yellen’s most tangible accomplishment so far is the progress she has forged on an international tax agreement designed to halt a global race to the bottom on corporate tax rates, a goal that has eluded negotiators for nearly a decade. The framework has the support of almost 140 nations but US voters, preoccupied as they are with kitchen-table issues, have not taken much notice..This account of Yellen’s struggle to find her footing is based on interviews with almost two dozen current and former senior officials in the US and elsewhere, most of whom requested anonymity to speak candidly. Yellen declined to comment for this story..The first central banker to hold the position since the Jimmy Carter years, Yellen is esteemed for her diligence and intellectual rigor. Yet she appears to lack the nimbleness that’s prized by denizens of the White House. That’s made her, at times, an awkward fit in this administration, according to US officials who’ve observed her interactions with members of the administration..Since taking office, the president has turned more often to a brain trust that includes Brian Deese, director of the White House’s National Economic Council, chief of staff Ron Klain, and national security adviser Jake Sullivan. In meetings, Biden has occasionally betrayed his own impatience with Yellen’s reliance on economic models over plain-speak..A pattern has emerged of Yellen being sidelined, with Biden deploying Deese to pitch major spending initiatives to House and Senate lawmakers. By contrast, her predecessor, Mnuchin, was tasked by then-President Donald Trump to orchestrate key deals on Capitol Hill, including a coronavirus rescue plan that ranks as largest fiscal package in US history..Deese, speaking on Fox News earlier this month, called Yellen the team’s “chief spokesperson on the economy.” Yet through Biden’s first nine months in power, Klain neglected to invite her to strategy huddles where Treasury had a stake, according to several officials familiar with the situation. That meant Yellen was unaware of some key economic messaging even if she was on the daily senior staff calls. White House spokesperson Alexandra LaManna said: “We dispute the premise of this story.” Klain declined to comment..In a statement, Deese rejected the notion that she was marginalized. “Secretary Yellen is an essential partner and an integral part of the administration’s economic policy team,” he said. “Her words and her perspective carry enormous weight.”.Treasury spokesperson Lily Adams says, “Secretary Yellen’s first 17 months at the Treasury have featured a series of highly consequential achievements, including negotiating a global deal on international tax, resolving a debt ceiling impasse, leveling unprecedented sanctions against Russia, and helping shepherd one of the fastest economic recoveries in our nation’s history.”.Yellen was also out of step with the White House when it came to deciding what kind of penalties to impose on Russia as punishment for its invasion of Ukraine in February. Within 48 hours of Vladimir Putin’s tanks rolling across the border, the European Union and the Group of Seven were ready to take the extraordinary step of cutting off Russia’s central bank from the global financial system..That was until Yellen, unexpectedly, stood in the way..She surprised officials participating in that day’s transatlantic phone calls and classified meetings by asking for more time to assess the risks of what would constitute as one of the harshest sanctions in history, according to people familiar with the episode. The measures had been drafted many days before by White House officials and were part of a suite of options that had been under consideration as early as November..In an unusual turn of events, White House and EU officials recruited Italian Prime Minister Mario Draghi to persuade Yellen (the two traveled in the same circles during their days as central bankers). US officials familiar with the discussion chafed at her hesitation. Time was of the essence, they argued, because if the Kremlin and the Bank of Russia got wind of what was being contemplated, they would be able to shift assets to shield them from sanctions..Yet the question comes back to why Yellen was caught off guard in key moments and to what extent it’s fair to hold her responsible for the economic missteps of the Biden administration when various US decision-makers were involved—and not always marching in lockstep..One G-7 official attributed her wariness that Saturday to the prospect that making Russia a financial pariah carried potential repercussions for the dollar’s role as the world’s preferred reserve currency. Once Yellen was on board, it was her idea to freeze the Bank of Russia’s assets, rather than ban currency transactions. That proved to be an astute move, showcasing her deep knowledge of the financial system, because it effectively closed a loophole that had allowed Russia to bring in money..More than 100 days into the war, new fractures are emerging inside the Biden administration on how to handle Putin. Officials at the State Department and the White House favor imposing harsh secondary sanctions, but Yellen and her team continue to advise a more cautious approach, just as they did in late February..Yellen’s standing overseas remains as high as ever. Draghi says she provided “invaluable” insights in the discussions that paved the way for the first wave of sanctions, while Christine Lagarde, president of the European Central Bank, characterizes her involvement as “formidable.” Canadian Deputy Prime Minister Chrystia Freeland says Yellen “understood very quickly that this was a historic moment that we needed to seize and act in new and creative ways.”.Sullivan, Biden’s national security adviser, says her “skill and diplomacy helped us rally the world to maximize the pain on Putin’s war machine.”.That may be so, but for Yellen the risk is that her legacy will be marred by events closer to home, specifically the perception by a majority of voters that the Biden administration has mismanaged the economy, particularly on inflation. Like her former colleagues at the Fed—including Jerome Powell, who succeeded her as chair—Yellen initially characterized inflation as transitory, a byproduct of tangled supply chains and temporary shortages of essential goods such as chips used in cars..By September 2021, her thinking had changed, and her staff shared fresh analysis with the White House, where it was largely disregarded, showing that price pressures were more widespread and more stubborn. Meanwhile, Biden has expressed anger toward his staff for not doing more to address the cost-of-living crisis hitting Americans, according to three people familiar with the matter..Rather than stay quiet, Yellen is now publicly contradicting some of the most powerful officials in the White House, including Biden. On June 9, she flat-out rejected their contention that corporate greed is feeding inflation. Blaming big businesses for price gouging has been one of the administration’s most consistent talking points, and the president returned to it on June 10 as he accused Exxon Mobil Corp. and other oil companies of exploiting high gasoline prices to pad their bottom line..Yellen’s need to defend her record has gained urgency with revelations from a yet-to-be-published biography that claims the Treasury secretary initially wanted to scale back Biden’s American Rescue Plan because of fears it could stoke inflation..One person familiar with the matter says Yellen did express concern over the size of Biden’s first major initiative as president. Her misgivings were ignored at the White House, where aides, including Deese, argued a too-small stimulus would doom the US to a slow, grinding recovery, as happened after the financial crisis..After failing to make a persuasive case, the person says, Yellen fell in line with the rest of the administration, keeping her reservations private. She’s refuted this account, saying: “I never urged an adoption of a smaller” rescue package..Independent economists, including Mark Zandi of Moody’s Analytics Inc., say the surge in prices for oil and other commodities sparked by the war in Ukraine, along with America’s housing shortage, are now the main factors driving inflation..Back in November 2020, Biden’s selection of Yellen as the first female Treasury secretary was considered a masterstroke. The thinking was that her impeccable economic credentials would allow her to stay above the fray..Instead, Yellen now finds herself in the middle of a brawl in Washington, where the latest worry is that the Fed’s quest to tame inflation will plunge the country into a recession, pushing up unemployment from the historic lows achieved under Yellen. Administration officials dismiss such talk, with Yellen also saying that she sees “nothing to suggest a recession is in the works.”.Democrats in Congress are clamoring for the White House to do more on the inflation front. But Biden in public comments has been shifting responsibility to the Fed, while acknowledging to Democratic donors that Americans will have to “live with this inflation for a while.”.For Yellen, who said months ago that fighting inflation is primarily the Fed’s job, the hard part will be making sure she’s not scapegoated. —.(Updates with additional comment from the White House in 12th paragraph.).More stories like this are available on bloomberg.com.©2022 Bloomberg L.P."

Janet Yellen Is Struggling At The Treasury Job She Never Wanted

Janet Yellen’s stint as US Treasury Secretary threatens to become a stain on a storied career of the former US Federal Reserve chairperson.

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Janet Yellen Is Struggling At The Treasury Job She Never Wanted

Janet Yellen’s stint as US Treasury Secretary threatens to become a stain on a storied career of the former US Federal Reserve chairperson.

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