The Biden government hopes to move quickly with the confirmation of Janet Yellen as the 78th Secretary of the Treasury.
The Senate Finance Committee will vote Friday morning on the nomination of the former Federal Reserve chairman, who is likely to draft a final vote on the Senate floor next week.
Markets will be engaged on Yellen’s first steps as secretary of the treasury.
If confirmed, Yellen’s immediate task would be to sell Congress on the Biden administration’s $ 1.9 billion stimulus package.
Yellen will also pursue a number of other issues that are important to markets, from financial regulatory issues to international issues.
Here is an introduction to the policy that a Treasury led by Yellen will follow:
‘Big’ on stimulus
In her nomination hearing on Tuesday, Yellen emphasized the specific need to become ‘big’ on stimulus.
As proposed, the Biden plan on COVID-19 relief will include additional $ 1400 stimulus checks and an additional $ 400 per week on unemployment insurance benefits, among others. Yellen said the best ‘afraid of the money’ would be public health spending to promote the vaccination process, in addition to easing relief for small businesses.
Yellen also pointed to the need to assist state and local governments with their large budget deficits.
With a Democratic majority in the Senate and House, the Biden government has more legislative room to pass a larger package than the Democrats would lose in the run-off battle for Georgia’s two Senate seats.
UBS Global Wealth Management says the increased chance of greater stimulus ‘makes stock valuations look more reasonable’, especially in a low interest rate environment.
“We see attractive opportunities including cyclical companies, sectors and markets,” Mark Haefele, UBS, wrote on Thursday.
Higher tax
The Biden administration’s tax policy framework includes a stricter tax on those earning more than $ 400,000 a year, with an increase in the tax rate to 28% (compared to the 2017 Trump tax cuts that set the rate at 35% to 21%).
Yellen said she would like to work with other countries on a globally coordinated approach to corporate taxation, adding that she does not want to harm the competitiveness of U.S. businesses.
But she stressed that her top priority is a tax base that supports investments in ‘things that will create good jobs’, such as infrastructure, manufacturing and research and development.
‘We need to think about taxation in the context of the package aimed at doing those things. And to the extent that funding is needed for these very valuable investments, I believe it should come in a fair way. ”
Trade relations between the United States and China
Yellen said China was “our main strategic rival”, but acknowledged that concerns over intellectual property theft and forced technology transfer, the issues in the midst of the US-China trade war between former President Donald Trump and Chinese President Xi Jinping.
Yellen has stated in general that she prefers to trade with countries rather than unilaterally, indicating that she would stay away from the Trump administration’s preference not to engage in group trade such as the Trans-Pacific Partnership. .
Yellen added that in cases where countries break the rules, “sanctions are a tool that can be very effective” – but are vague about how she can use the tool.
Fed policy
Yellen is also likely to use her deep knowledge of monetary policy in conjunction with her old colleague Jerome Powell, who currently heads the Fed.
In addition to Trump’s Treasury Secretary Steven Mnuchin, Powell helped prevent a full-blown financial crisis by using Coronavirus Aid, Relief and Economic Security (CARES) funds to help markets ranging from corporate debt to municipal bonds. stop. Several of the programs expired late last year, and there are legal questions regarding Yellen’s ability to reopen them.
“Yellen and Powell have called for sustained and robust support for the economy, which would eliminate the recent friction between Finance Minister Mnuchin and the Fed over the continuation of the Fed’s lending programs,” writes analyst Ed Mills of Raymond James, when Yellen was nominated in November. .
Yellen also made it clear that the Fed’s low interest rates are one reason the Fed can afford it now.
“The interest burden on debt as part of GDP is now no higher than before the financial crisis in 2008,” Yellen said on Tuesday.
Financial regulation
The Biden administration is rounding off its agency appointments, with Gary Gensler expected to head the US Securities and Exchange Commission (SEC) and Rohit Chopra at the helm of the Consumer Financial Protection Bureau (CSFB).
Isaac Boltansky of Compass Point wrote on Monday that the appointments point to a regulatory agenda with a ‘meaningful rampage in supervisory, appropriate and regulatory activities’.
But in the banking space, Yellen told Congress she could see the capital levels “pleasantly” through the pandemic, indicating that she was generally comfortable with the regulatory institutions.
The Trump administration has implemented some repercussions of the Dodd-Frank framework for financial regulation installed by the Obama administration after the financial crisis. And while the Biden government is reportedly planning to appoint Michael Barr, one of Dodd-Frank’s architects, as a key bank regulator, Sherrod Brown, the top Democrat on the Senate Banking Committee, has suggested he will not work on the Undo Trump regulations. setbacks.
In turn, Yellen could focus on climate change-focused financial policies, which she described on Tuesday as an “existential threat.” Yellen said she plans to appoint someone at a very senior level in the Treasury to focus specifically on financial risks and tax benefits associated with climate change. The Federal Reserve has already called for more transparency of financial ventures on climate risks.
Digital currencies
In 2018, Yellen said she’s not a fan ‘of the abundance of cryptocurrencies out there. But Yellen could soften her tone if the Fed investigates the development of its own stable currency.
Over the past few years, the Fed has been experimenting with digital dollars, adding the use of a central bank-issued digital currency. Fed officials have made it clear that while experimenting with the technology, they have not committed to actually launching it.
Yellen’s remarks to Congress, however, do not point to a warm view of cryptocurrencies.
“Cryptocurrencies are of particular concern. Many are being used, at least in a transactional sense, for illegal financing,” Yellen said Tuesday. “I think we really need to investigate how we can curtail its use and make sure that money laundering does not take place through the channels.”
Brian Cheung is a reporter on Yahoo Finance, Fed, Economy and Banking. You can follow him on Twitter @bcheungz.
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, Youtube, en reddit.