Former Federal Reserve Chair Janet Yellen was confirmed as treasury secretary Monday, with the Senate voting 84-15 to make her the first woman to lead the department.
Yellen steps into the role with some advantages: She is well known and well respected among lawmakers of both parties, and she has experience with enormous economic challenges. Yellen had been expected to be confirmed easily after her nomination passed the Senate Banking Committee on a 26-0 vote Friday.
Yellen, a New York native, received her Ph.D. from Yale University and taught at Harvard University, the London School of Economics and the University of California, Berkeley, in addition to holding numerous positions at the Fed before she became the first woman to head it in its history in 2014.
"As Federal Reserve Chair, Yellen worked to build constructive relationships with members of the House and Senate," said Mark Hamrick, a senior economic analyst at Bankrate. "In that position, it was important to avoid overstepping certain political lines."
Yellen's role is inherently political — which means she will have to thread a needle as she engages with lawmakers.
"The less overtly political Yellen is, the more credibility she will have with the financial markets," said Stephen Myrow, managing partner at the policy research consulting firm Beacon Policy Advisors.
Yellen's tenure is sure to be a marked change from that of her predecessor Steven Mnuchin, the investment banker who oversaw the Treasury under former President Donald Trump.
Yellen, the product of a middle-class upbringing in the New York borough of Brooklyn, has cited the critical — if often unseen — role that macroeconomic principles play in the day-to-day well-being of American families. At the Treasury Department, she is expected to target the roots of the nation's growing inequality, along with the factors that aggravate it.
Yellen spoke about economic inequality and the "K-shaped" recovery in her hearing before the Senate Banking Committee, making the economic argument that facilitating broader access to financial stability doesn't just benefit individual Americans but that it also strengthens the economy as a whole.
"It will be her job to help deliver the next round of economic stimulus, or relief, legislation with its steep price tag by lobbying members of the Senate," Hamrick said.
Mark Zandi, chief economist at Moody's Analytics, said: "Secretary Yellen will be all about using muscular fiscal policy to support strong economic growth that will benefit even the hardest-pressed low-income and minority households. She has long been an advocate for addressing the income and wealth distribution, and now she will be able to act on it."
She is also expected to be an advocate for President Joe Biden's other long-range policy goals, such as increasing green energy production. Yellen, a member of the Climate Leadership Council, an international policy institute, has expressed support for a carbon tax and has testified before Congress about an economic rationale for reducing greenhouse gas emissions.
"Yellen's oversight of the Fed during a critical portion of the economy's recovery from the Great Recession will serve her well."
Yellen will work closely with current Fed Chair Jerome Powell to help support the fragile recovery, which has begun to flash warning signs as the pandemic continues to surge out of control in many parts of the country.
Policy observers say her oversight of the Fed during a critical part of the economy's recovery from the Great Recession will serve her well as the pandemic continues to weigh on the labor market and economic activity, as will support she has cultivated across the political spectrum — a rare commodity in a polarized Washington.
Since the early days of the pandemic, Powell's Federal Reserve has leveraged its power to stabilize the financial system. Economists widely agree that the interventions saved markets from a potentially catastrophic meltdown in the spring — but there are limits to what the Fed can achieve with monetary policy, a point Powell has made many times, along with increasingly dire warnings for lawmakers about the near- and long-term consequences of failing to act swiftly on fiscal stimulus legislation.
At the Treasury Department, Yellen will be positioned to put pressure on a sharply divided Congress more directly.
"The treasury secretary's most powerful tool is the bully pulpit. For that to be effective, though, the treasury secretary needs to have credibility," Myrow said. "I think the strong bipartisan support her nomination has received, despite the hyperpartisan environment, is a testament to the reservoir of credibility she brings with her to the role."