Carney: In Janet Yellen’s Nomination, A Break from the Past

Janet Yellen breezed through her confirmation hearing on Tuesday and Joe Biden’s nomination of her to head up the Department of Treasury will likely win approval of the Senate Finance Committee, perhaps as soon as Thursday.

So it is worth taking notice of how unusual the nomination of Yellen is and how little her experience matches that of her predecessors. Yellen has plenty of qualifications—they just aren’t the qualifications that usually earn someone the role of Treasury Secretary.

In looking turning to Yellen, Biden broke with longstanding precedent. Every Treasury Secretary in modern history has had experience in the private sector or in Treasury Department itself. For most of U.S. history, the role has gone to a businessman and rarely to anyone who was primarily an academic or central banker.  This wasn’t usually considered a role for PhD. economists.

Of the last fourteen Treasury Secretaries, only Tim Geithner and Larry Summers lacked extensive private sector experience. Jack Lew, Obama’s second Treasury head, was the chief operating officer of Citigroup from 2001 through 2006. Geithner served in the international affairs division of the Treasury Department and was Under Secretary for International Affairs under Robert Rubin and Summers. Summers held various positions in Treasury and was eventually Under Secretary for Rubin during the Clinton Administration.

Yellen’s background marks a departure. She has spent her early career in academia and most of the latter part of her career at the Federal Reserve, eventually rising to be the chairman of the U.S. central bank. During the Clinton administration she served as chair of the Council of Economic Advisers, the closest position she has held to an administration policy-making role—although the CEA is typically considered more of an advisory panel than a policy board. When Donald Trump declined to appoint her for a second term, itself a break from precedent, she joined a Washington, D.C. think tank rather than pursue work in the private sector.

Yellen’s supporters argue that her academic work and experience at the Federal Reserve make her uniquely qualified to be Treasury Secretary. History will have to be the judge of that proposition. It is odd that so little has been made of this departure from historical norms. Even at her confirmation hearing, no one brought it up.

And it’s not as if Yellen’s stint as Fed chief put her beyond approach. Economic inequality grew during her term in office. The Fed consistently failed to meet its goal of producing two percent inflation and unemployment remained elevated for most of the period in which she led the central bank. For an institution whose dual mandate is to aim for price stability and maximum employment, those are serious shortfalls.

Biden decided to break with tradition by appointing an academic economist to the post once held by Alexander Hamilton and few in Washington, D.C. found anything remarkable about the appointment—if they even noticed.