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Scoop: All living former Treasury secretaries back Yellen — Janet Yellen will testify before the Senate Finance Committee this morning at 10 a.m. on her nomination to serve as Treasury Secretary, a day before Joe Biden will be inaugurated as the 46th president of the United States.
Yellen is not expected to face any serious opposition, a fact underscored by a letter going out this morning signed by every living former U.S. Treasury Secretary from both parties including Republicans Hank Paulson, John Snow, Paul O’Neill, James Baker and George Schultz. We are told that Schultz, at 100 years old, offered line edits on the letter.
From the letter: “We write … to encourage the swift confirmation of Dr. Janet Yellen as the 78th United States Secretary of the Treasury. Our nation faces urgent economic and national security challenges, and we believe that delaying the confirmation of our government’s principal economic official would create unnecessary risk during this critical time. …
“Between the recent turmoil in the United States and the magnitude and urgency of international economic fallout from COVID-19, our allies are looking for reassurance that our country will be a trusted and reliable partner.”
Per our Victoria Guida, Yellen “will tell senators … that Congress must do more to prevent lasting damage to the economy from the coronavirus pandemic, advocating for … Biden’s nearly $2 trillion proposed relief package. ‘Without further action, we risk a longer, more painful recession now – and long-term scarring of the economy later,’ Yellen says in prepared testimony
Biden lines up financial services nominees — Biden plans to nominate Rohit Chopra to head the CFPB, thrilling progressives, and made official the nomination of Gary Gensler (once a Goldman Sachs executive but now a hero on the left,) to head the SEC.
Chopra helped set up the CFPB with Sen. Elizabeth Warren (D-Mass.) and he likely could not have been confirmed under a GOP Senate. It’s still not a lock. Still, while banking execs won’t love it, they will probably have to deal with it and a return to more aggressive oversight of the industry. Same holds true for Gensler, who drove bank execs nuts with his aggressive approach as chair of the CFTC. (More below.)
GOOD TUESDAY MORNING — Welcome to Inauguration Week! God willing all will proceed peacefully from here. But we’ve already had the first non-peaceful transition of power in our history. Email me on [email protected] and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on [email protected] and follow her on Twitter @AubreeEWeaver.
Yellen hearing begins at 10 a.m. before Senate Finance with stimulus top on the agenda but a wide range of questions expected including on housing finance reform and bank regulation …
Biden has a send-off event in Wilmington, Del. and will speak in the evening at the Lincoln Memorial with VP-elect Kamala Harris to honor the dead from Covid-19 … Business Roundtable has a briefing at 10:45 a.m. on priorities for the new White House.
BIDEN NOMINEE REACT — Cap Alpha’s Ian Katz: “The news … Biden will nominate … Chopra … produced groans in the finance industry, much the way the Gary Gensler SEC nomination did last week. Perhaps the worst indicator for financials is that Elizabeth Warren is delighted with the two picks.
“Both of these nominations face a tough confirmation path. … Democrats have the numbers to confirm. But there’s no margin for error, defection or illness. The outcome might depend not just on a handful of senators, but on attendance. Not to be too gloomy, but one or two COVID exposures on either side could tilt the balance.”
Compass Point’s Isaac Boltansky: “Both Gensler and Chopra are expected to oversee a meaningful ramp in supervisory, enforcement, and rulemaking activity. For the SEC, we should expect a pronounced focus on ESG disclosures, diversity disclosures, investor protection … and a measured continuation of market structure reforms.
“For the CFPB, we should expect a renewed focus on enforcement, a reopening of the small dollar rule, and persistent headline pressure for the education finance industry. We also note that both the SEC and CFPB could chart new courses on burgeoning areas such as crypto and open banking, respectively.”
OCC FAVORITES — Our Victoria Guida, Zachary Warmbrodt and Tyler Pager: “Law professor Mehrsa Baradaran and former Treasury Department official Michael Barr are leading contenders to head the Office of the Comptroller of the Currency, the national bank regulator …
“Baradaran, an expert on the racial wealth gap and a favorite of progressives, would represent a major break from previous leaders of the OCC, who have often been accused of being too cozy with the banks they oversee. One of the policies she is best known for advocating is the delivery of financial services through the U.S. Postal Service, which banks are vehemently opposed to.”
WASHINGTON ON LOCKDOWN — Our Lara Seligman: “The Pentagon … authorized hundreds of active-duty troops to support enhanced security measures related to … Biden’s inauguration, as local law enforcement continues to track threats of violence in the nation’s capital in the days leading up to the ceremony …
“The 750 active-duty personnel deployed this week include service members with expertise in handling chemical, biological, nuclear, radiological and explosive weapons, as well explosive ordnance disposal and medical teams skilled in trauma response”
HOPE (AND FEAR) ON COVID — Pantheon’s Ian Shepherdson: “It should be clear from last week’s economic data—specifically, the contrast between the strong manufacturing output numbers and the grim retail sales report—that a sustained re-acceleration in the economy from its current doldrums can’t happen until Covid is defeated.
“Daily new cases and hospitalizations are now coming down, and deaths appear to have peaked … But we can’t rule out a renewed surge if the B117 Covid variant, first identified in the U.K., takes hold in the U.S. before vaccination—and prior infection—generates substantial immunity.”
FIRST LOOK — Progressive group Accountable.US has a new report out today “that compiles the key right-wing groups that helped make the January 6th Capitol coup attempt happen and the money behind them.”
OUTLOOK DARKENS FOR WALL STREET AS BIDEN’S REGULATORS TAKE SHAPE — Reuters’ Michelle Price: “Wall Street may be facing an uncomfortable four years after President-elect Joe Biden’s team confirmed on Monday it planned to nominate two consumer champions to lead top financial agencies, signaling a tougher stance on the industry than many had anticipated.
“Gary Gensler will serve as chair of the Securities and Exchange Commission (SEC) and Federal Trade Commission member Rohit Chopra will head the Consumer Financial Protection Bureau (CFPB). Progressives see the agencies as critical to advancing policy priorities on climate change and social justice.”
AFTER STOCK SURGE, INVESTORS ASK COMPANIES WHAT’S AHEAD — WSJ’s Karen Langley: “Companies reporting results in coming weeks are under heightened pressure to spell out how their performance in 2021 is likely to justify share-price gains notched during an epic stock-market rally.
“A first round of big-bank results late last week highlighted the challenge. JPMorgan Chase & Co. reported a record quarterly profit and there were bright spots at Citigroup Inc. and Wells Fargo & Co. Still, shares of all three declined, with Wells and Citi each dropping more than 6 percent.”
BIDEN’S TEST: ENGINEERING ECONOMIC BOOM IN A PARTISAN DIVIDE — AP’s Josh Boak: “When Joe Biden entered the White House as vice president, the economy was cratering. Job losses were mounting. Stocks were crashing. Millions of Americans were in the early stages of losing their homes to foreclosure as the housing bubble burst.
“Biden returns to the White House as president a dozen years later with the economy battered and shaken by a pandemic. But this time is different — and it could reset the nation’s politics if Biden and Democrats can count on a level of growth not seen in a generation.”
YELLEN TO FACE CONFIRMATION HEARING — Bloomberg’s Saleha Mohsin and Christopher Condon: “Treasury Secretary nominee Janet Yellen on Tuesday steps into a new role following more than a quarter-century in government: salesperson for economic policy after years of defending Federal Reserve thinking and actions.
“The Senate Finance Committee’s 10 a.m. hearing Tuesday is likely to feature topics from foreign-exchange policy to taxes, but it will also serve as the first congressional forum where lawmakers will vet President-elect Joe Biden’s $1.9 trillion Covid-19 relief plan. Yellen will tell them that low borrowing costs mean it’s time to ‘act big,’ according to her prepared remarks.”
And she’s calling for more aid — WSJ’s Kate Davidson: “Economists don’t always agree, but I think there is a consensus now: Without further action, we risk a longer, more painful recession now—and long-term scarring of the economy later,’ Ms. Yellen will say. ‘Over the next few months, we are going to need more aid to distribute the vaccine; to reopen schools; to help states keep firefighters and teachers on the job.’”
HOW FULL EMPLOYMENT BECAME WASHINGTON’S CREED — NYT’s Jeanna Smialek: “As President-elect Joseph R. Biden, Jr. prepares to take office this week, his administration and the Federal Reserve are pointed toward a singular economic goal: Get the job market back to where it was before the pandemic hit.
“The humming labor backdrop that existed 11 months ago — with 3.5 percent unemployment, stable or rising work force participation and steadily climbing wages — turned out to be a recipe for lifting all boats, creating economic opportunities for long-disenfranchised groups and lowering poverty rates.”
IMF CHIEF SEES ‘HIGH DEGREE OF UNCERTAINTY’ IN GLOBAL OUTLOOK — Reuters’ Andrea Shalal: “The head of the International Monetary Fund on Monday said the global lender needed more resources to help heavily indebted countries, citing a highly uncertain global economic outlook and a growing divergence between rich and poor countries.
CHINA ECONOMY GROWS IN 2020 AS REBOUND FROM VIRUS GAINS — AP’s Joe McDonald: “China eked out 2.3 percent economic growth in 2020, likely becoming the only major economy to expand as shops and factories reopened relatively early from a shutdown to fight the coronavirus while the United States, Japan and Europe struggled with rising infections.”
