White House Continues Denying Rumors That Treasury Sec Janet Yellen Will Leave Position

Treasury Secretary Janet Yellen sure looks like she’s got the backing of the “Big Guy,” aka Joe Biden, to remain as steward of the $25 trillion US economy.

There are continued denials by the White House flack that Yellen is about to be jettisoned, despite persistent speculation to the contrary.

Yellen is doing lots of media, taking a victory lap for her continued role in helping Sleepy Joe shape economic policy, signaling she wants to be around.

And yet the speculation is continuing.

Wall Street execs with White House connections tell me she’s a likely goner; it’s not a question of if, but when the president will pull the plug on what’s shaping up to be a disastrous two years of policy leading to what many economists see as a baked-in 2023 recession.

You can’t pin the economy’s faults all on Yellen, of course. But she’s the top cheerleader for an economic dunderhead. Biden’s goal since being elected in 2020 was to be more “transformational” (progressives love that word) than his old boss, the economic progressive Barack Obama.

That meant trillions of dollars in unnecessary spending rationalized as necessary because of the pandemic. Recall: The outlays came mainly in the waning months of COVID when business closures were ending.

Yellen oversaw Biden’s push to ramp up the economic regulatory infrastructure at a time when post-lockdown supply-chain bottlenecks were beginning to appear, thus making them worse.

Combined with money-printing from the Fed (also endorsed by Sleepy Joe and Yellen), the result could be predicted by anyone who has taken Econ 101 (and many sentient beings who haven’t): Massive inflation that is an onerous tax on the working class.

Yellen, of course, has taken more than just Econ 101. But she has lots of experience in government and academia (Fed chair, etc.) devoid of real-world experience.

Inflationary spiral

And it shows. She spent months downplaying the inflationary threat as transitory until it was proven not to be. Ideological lefty economists of her ilk often have a soft spot for the inflationary spiral since it usually accompanies growth and wage gains, as we have today.

Yet history shows that wage gains never keep up with prices, leading to stagflation because people can’t afford either the extras or, increasingly, the basics. It can be unwound only through pro-growth policies (deregulation, which the Biden people and Yellen refuse to do) or if the Fed steps in, smothering the inflationary burn through higher interest rates, lower growth, and a likely recession.

That’s what we face now. The Fed under Jerome Powell has signaled that inflation, though abating, is still stubbornly high — and wages aren’t keeping pace. There will be more rate increases no matter how much markets are clamoring for a so-called pivot. Biden has shown no inclination to let up on regulation. Under this scenario, odds are we’re heading into a recession; it’s just a matter of how deep of a downturn we will see.

Someone will have to take the fall for the economic mess that is about to hit the nation, probably in the new year, and the betting in DC, relayed to top Wall Street execs, is that it will be Yellen. The good news is that her replacements are all a step up in the type of economic intelligence that is really needed.

Yellen, as I mentioned, has no real-world business chops. Now contrast that with the background of the people who will likely replace her: In the lead, I am told, is Commerce Secretary Gina Raimondo, formerly the successful governor of Rhode Island and an economic centrist who helped reform the state’s pension fund. She also worked in venture capital, starting a VC fund that seeded businesses in the state.

I’ll take that over Yellen’s wonky textbook-driven approach to economics any day.

Another leading contender on the shortlist is Brian Moynihan, the CEO of Bank of America, sources close to the White House tell me. Bankers are a tough sell to powerful progressives, like Massachusetts Sen. Elizabeth Warren, who has a say over Biden’s economic appointments.

But Moynihan took over BofA at one of its darkest hours in the aftermath of the 2008 financial crisis and brought it back to health. Today the nation’s second-largest bank by assets is on strong footing because of his steady hand over the past decade-plus. Not a bad economic point man if you expect a recession in 2023.

Could it be Gensler?

The dark horse in the race to succeed Yellen is Securities and Exchange Commission Chair Gary Gensler, a darling of progressives. He has steered the investor-watchdog agency into the ESG culture wars with new proposals that would force companies to disclose how they are reducing their carbon footprint.

He’s also probably the worst of the three candidates and will likely generate opposition from Senate Republicans and Democratic moderates he needs to gain confirmation.

But his somewhat prescient warnings about the perils of unregulated crypto, his background as a banker at Goldman Sachs, and his work in various government economic-related jobs are a plus.

One thing is certain: Any of the three would be a vast improvement over what we have now.