U.S. should ‘act big:’ Yellen at confirmation hearing

Yahoo Finance’s Alexis Christoforous and Brian Cheung discuss the latest developments out of Janet Yellen’s confirmation hearing for U.S. Treasury Secretary.

Video Transcript

BRIAN CHEUNG: We were watching Goldman Sachs and Bank of America earnings this morning. But obviously markets really fixated on Treasury Secretary, or pending Treasury Secretary, Janet Yellen's confirmation hearing in the Senate Finance Committee. That kicked off it at 10:00 AM. And it only just wrapped up about an hour or so ago.

Again, the former Fed Chair is the pick for the Biden administration to head the Treasury. And she did say that she was really trying to sell this $1.9 trillion package that the incoming Biden administration had unveiled last week. As we know, it includes an extra $1,400 in those stimulus checks, in addition to a $400 a week unemployment insurance or similarly what we saw in the Cares Act.

Now she said, though, that she's going to try to do all this, because obviously that's a pretty large price tag, $1.9 trillion. Within the context of the national debt, she said she will be paying mind to that. Here's what she told the Senate Finance Committee earlier this morning.

JANET YELLEN: The most important thing, in my view, that we can do today to put us on a path of fiscal sustainability is to defeat the pandemic, to provide relief to American people, and then to make long-term investments that will help the economy grow.

BRIAN CHEUNG: And some of those investments that she was referencing would be things like research development into the United States manufacturing infrastructure, in addition to broad infrastructure spending. She said that, yes, while it's important to be mindful of the unsustainable pace of debt, she doesn't want that to preclude an aggressive fiscal stimulus plan that makes sure there isn't permanent scarring in the US economy.

Now of course, the former Fed Chair was speaking about a number of other policy related issues that would be under her purview if she is confirmed as Treasury Secretary, for example, on tax policy. She said that it's very important that corporations and wealthy individuals pay their fair share. That's how she described it.

She also talked about things like even cryptocurrency. She said that it was an effort that the Treasury needed to undertake, if she is confirmed to, quote, curtail the use in illicit activities, referring to issues under anti-money laundering. And then she also said that on climate change, she's going to be very fixated on making sure that climate related risks in the financial system in addition to tax policy incentivize a greener economy.

She said that she will be appointing someone that's at a pretty senior level within the Treasury to deal with those issues. And then lastly, very interestingly, it seems like this nomination could be moving quite quickly.

Actually, the Senate Finance Committee chairman that will be heading that in the future, who is Ron Wyden, a Democrat from Oregon, said that the vote on the full Senate floor could actually happen as soon as Thursday, so a lot of really interesting things going on right there, Jared.

JARED BLIKRE: And I just wanted to kind of follow up on the regulatory landscape, how you see it evolving over the next few years, maybe even a decade, because it seemed like the last decade, during the teens, it was kind of about Dodd-Frank and reforming regulations. And then at the end, we kind of had a rollback of some of those.

Especially with Gary Gensler now set to take up the SEC, how do you see the regulatory framework for banks and stocks, whatever, evolving in the new decade here?

BRIAN CHEUNG: Yeah, absolutely. And when we think about the Treasury's role in all that, we have to understand that it's really not, for example, the Treasury that's uniformly in charge of regulating these spaces.

The SEC has control over the capital markets, whereas the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation deal with banks. The CFTC works with commodities. So there's a lot of kind of piecemeal structure down in Washington DC over how to address all these things. But it's really the Treasury that kind of guides where regulation goes in a given administration.

If you rewind to the beginning of the Trump administration, for example, it was the Steve Mnuchin led Treasury that sent out a big kind of white paper that outlines to the broad agencies, which also have political appointees, about how to approach regulation over the course of that administration. We should expect to see the same thing under a Yellen administration.

And we already kind of know where she lands on specifically bank regulation, because she was the former Fed Chair. It was under her rule at the Federal Reserve where they created a more stringent framework for policing the banks. Of course, that was after 2008 and the Dodd-Frank bill, which actually mandated that the Fed do a lot of these things.

So that would be very interesting to watch in that space, again, as Gary Gensler, also the pick for the SEC, began. All these things are pending Senate, not a confirmation. Of course, as we know, with that narrow lead of the Democrats in the Senate, there still are 50 Republicans in the Senate too. So that should expect to moderate policy in the coming years as well.

JARED BLIKRE: Yeah, lots of moving parts there. And if there's one thing we know, Janet Yellen does know banking.