Progressives praise Yellen but could soon clash with Biden’s Treasury pick

Progressive groups celebrated President-elect Joe Biden’s choice of Janet Yellen for Treasury secretary, lauding her as an open-minded professional willing to take on Wall Street.

But the party may not last.

Activist groups are hopeful that their views will get a hearing from Yellen, but there are key areas — pandemic relief, trade, financial regulations. student loan debt — where she could quickly disappoint them, based on her record.

While she’s a strong advocate for a big new economic relief package, she has also spoken forcefully about the need to get the growth of the federal deficit under control. She is a long-time supporter of free trade, which many progressives consider a threat to American workers.

And while she oversaw the imposition of tough new banking rules as Federal Reserve chair in the Obama era, she played little direct role in shaping them, raising questions about how aggressive she’d be about new financial regulations.

“We’re under no illusions that we as leftists or progressives are so powerful that we’re the go-to force in American government,” said Maurice BP-Weeks, co-executive director of the Action Center on Race and the Economy. “We’re going to have to push, making as much noise as possible, so that she responds to us and not to Wall Street.”

Looming large is the legacy of President Barack Obama, whose efforts to help vulnerable communities in the wake of the subprime mortgage crisis fell far short of what progressive groups wanted, and millions of families ultimately faced foreclosure.

“Last time around, the administration listened too much to the naysayers at banks and on Wall Street about what could be done, and not enough to those of us in the field who knew the pain that families were facing and how inadequate the programs were,” said Lauren Saunders, associate director at the National Consumer Law Center.

After Biden's selection of Yellen was revealed on Monday, leading progressives took to Twitter to praise her. Sen. Elizabeth Warren (D-Mass.) called her "an outstanding choice" and "tough, smart and principled.”

“2 cheers for Janet Yellen at Treasury,” former Labor Secretary Robert Reich tweeted. “She’s not @SenWarren but she’s not from the Street.”

Given that Yellen has spent most of her career focused on labor markets and monetary economics, many other progressives aren’t sure what to expect from her. But they note her willingness when she was Fed chair to engage with the Fed Up coalition, a leftist group that opposed the interest rate hikes under her watch. That relationship helped shift the central bank’s stance toward inflation, where it will now be slower to raise borrowing costs that are a burden to many ordinary Americans.

Still, some of her past statements give them pause. Yellen, who sits on the board of the Committee for a Responsible Federal Budget, has warned repeatedly about the growing debt for the past decade, even as deficit concerns have become viewed as increasingly illegitimate on the left.

In a February event at George Washington University, she noted that the ratio of debt to the size of the economy has doubled since the 2008 financial crisis.

“For more or less the last 20 years at least, what you see is the U.S. debt path is completely unsustainable under current tax and spending plans,” she said. “That fundamental problem ... is something that most people don’t understand, and I see very little evidence of concern about it in recent years.”

That concern could spill over into the push by left-leaning groups to eliminate student loan debt, something that would further decrease revenue for the federal government, though Yellen has previously expressed worry about rising college costs and entertained the notion that student debt could be holding millennials back from buying homes.

She also led a 1998 report as chief economist under President Bill Clinton, which argued that free trade generally didn’t trigger job losses, but instead led to a reallocation of workers to better jobs.

“There are circumstances," the report said, "in which trade can lead to job gains: When unemployment rates are high, the expansion in exporting industries can be accomplished by hiring unemployed workers."

Jeff Hauser, director at the Revolving Door Project, said he was heartened by the visitor logs during Yellen’s time as Fed chair, which show she met more often with Warren and Rep. Maxine Waters (D-Calif.) than she did with some of the more moderate Democrats.

She also met with the AFL-CIO four times, including a discussion with the labor union federation early on in her tenure. That suggests she’ll have an open door to progressives, he said.

“She’s always been primarily focused on preventing and alleviating the impacts of unemployment,” he said. “People can isolate random quotes as they like, but progressives know who she is. … She’s a fact-based person, who will update her priors as the facts dictate.”

The top priority for almost all groups is passage of a new economic relief package, legislative negotiations where Yellen would play a key role on behalf of the administration. That should include provisions that prevent people from being evicted while the health crisis persists, Saunders said.

Saunders emphasized the need to cancel or defer student loan payments more broadly, especially since existing forbearance provisions are set to expire at the end of the year. And Yellen should work to ensure that the government doesn’t go back to garnishing wages or reducing tax credits as a means of collecting student debt payments, she added.

“Treasury has a lot of authority in how it collects debts owed to the federal government, and I think it could do that administratively,” she said.

It’s also important for Yellen to chart a path to increasing affordable housing, according to Jesse Van Tol, who heads the National Community Reinvestment Coalition.

Treasury holds a majority ownership stake in the two mortgage companies at the center of the housing finance system, Fannie Mae and Freddie Mac, and can drive reforms there and elsewhere. Van Tol criticized past efforts to overhaul the system to shield taxpayers from future losses, which he called “a really uninspiring goal.”

“The goal should be doing a better job of ensuring broad access to homeownership,” he said.

Van Tol described Yellen as “incredibly nice, incredibly compassionate,” though he acknowledged that she’s less interested in politics, and he said she might look to balance that out with a more politically minded deputy.

Environmental activists see Yellen as a potential ally in their quest to focus the finance sector on addressing climate change but say she has to go beyond calling for a carbon tax. Yellen has called such a tax — which is even supported by corporations like Exxon Mobil — a “textbook solution” to addressing greenhouse gas emissions. But growing numbers of environmentalists say any tax large enough to counter emissions on its own would be so expensive as to be politically unpalatable.

Proponents of strong financial rules are hoping Yellen will push to rein in firms that haven’t been subject to the same aggressive regulation as banks in the wake of the 2008 financial crisis, as chair of the Financial Stability Oversight Council.

“There’s a hope that she would step up to the plate on hedge funds and nonbanks,” said Marcus Stanley, policy director at Americans for Financial Reform.

In this respect, progressives will also be watching closely to see the team of financial regulators that will be named alongside Yellen, including chair of the Securities and Exchange Commission.

“The SEC chair is a really linchpin critical choice in financial regulation,” Stanley said. “It’s what’s going to make the framework stand or fall in terms of how much real progress is going to be able to be made.”

More generally, progressive groups would like to see coordinated efforts to combat economic inequality among the poor and people of color. BP-Weeks said Treasury Secretary Steven Mnuchin has been aggressive in charting out an expansive portfolio.

“I want to see Yellen equally as active and pushing for using all the tools that Treasury has, and a couple that haven’t been used, to really stimulate and get money into the economy, especially to the most vulnerable folks — Black, and brown, and working poor folks,” he said.