Biden’s tough choice on who will lead Treasury

By Hannah Lang, Brendan Pedersen, Joe Adler

November 10, 2020 9:00 PM

WASHINGTON — President-elect Joe Biden will inherit a very uncertain economy on Jan. 20. It remains to be seen whether Congress can agree on a stimulus package during the lame duck period, and how an almost certain second wave of COVID-19 cases will affect jobs, business closures, consumer spending and financial stability.

Biden’s Treasury secretary, which he is expected to name in the coming weeks, will be tasked with presiding over a U.S. economy that has not only been ravaged by the pandemic, but is facing new reckonings over racial inequality and climate change. The Treasury chief is also the incoming cabinet’s primary financial policymaker, with influence over bank regulatory changes, reforming the housing finance system, and what legislation affecting banks gets the administration’s support.

But with the control of the Senate still up in the air until two Senate races in Georgia are decided by January runoffs, Biden will likely be forced to select a Treasury secretary that could be approved by a Republican-controlled chamber.

Plus, if Republicans retain control of the Senate, Biden may have to select someone able to negotiate a sweeping economic stimulus package with Senate Majority Leader Mitch McConnell. That could mean compromising some components that Democrats had hoped would pass easily if the election produced a Democratic majority in the Senate.

The Senate factor almost certainly means that some of the more progressive names that had been floated before the election for Treasury secretary, like Sen. Elizabeth Warren, D-Mass., or former Labor Secretary Robert Reich, are nonstarters. But it’s not completely out of the realm of possibility that Biden would choose a more left-of-center candidate to appease the progressive side of his party.

Still, Biden’s Treasury secretary will have far-reaching influence over banking policy, from heading the Financial Stability Oversight Council to working with the Fed to finance emergency lending facilities.

The president-elect’s transition team provided a glimpse of how the selection process could take shape when it released a list of volunteers and paid employees advising the incoming administration on key appointees. Leading the Treasury Department review team is Don Graves, an executive at KeyBank.

Here are some of the candidates to lead the Treasury Department under Biden:

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Lael Brainard

Federal Reserve Gov. Lael Brainard is the front-runner to lead the Treasury Department in a Biden administration, and if appointed, she would become the first woman to serve as Treasury secretary.

Brainard was nominated to the Fed board in 2014 under former President Barack Obama. But in the Trump administration she became best known as a dissenting voice, opposing deregulatory measures.

When she voted against a proposal in April 2018 to modify a key capital measure for the largest banks, it was the first time a member of the Fed's board had recorded a "no" vote on regulatory policy in over six years. Brainard went on to dissent from several more proposals, earning support from Democrats and consumer advocates who saw her as a potentially important economic policymaker in any future Democratic administration.

Before she became a Fed governor, Brainard served in senior roles in the Treasury Department from 2009 to 2013, as well as a member of the Financial Stability Board and U.S. representative to the G-20 finance deputies. She was also deputy national economic adviser to former President Bill Clinton and his personal representative to the G-7.

In order to make a final decision on Brainard, Biden will need to decide if she would make a bigger difference at the Treasury Department or at the Federal Reserve. Current Federal Reserve Chair Jerome Powell’s term expires in 2022, and while many expect Biden could choose to renominate him for another term, if Biden prioritizes stronger financial regulation, he could opt to choose Brainard instead, given her support for preserving Dodd-Frank regulations.

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Sarah Bloom Raskin

Sarah Bloom Raskin, former deputy secretary of Treasury under Obama and a Fed governor from 2010 to 2014, has also been floated as a candidate for Treasury secretary. She would bring experience to the role while also pleasing the more progressive side of the Democratic Party.

Raskin — who is married to Rep. Jamie Raskin, D-Md. — was Maryland’s commissioner of financial regulation during the throes of the financial crisis from 2007 to 2010 and is currently a professor at Duke University’s law school. She also is the chair for the board of directors at the social impact company i(x) Investments.

She has become a popular figure among Democrats, especially those who lean left, for her outspoken stances on climate change. Raskin testified in March before the House Select Committee on the Climate Crisis, during which she said, “If we ignore climate change, we in essence destroy the economy.”

Raskin also wrote an op-ed for The New York Times in May criticizing the Fed for investing in fossil fuel companies as part of its COVID-19 response, and called for U.S. banks to be more proactive in addressing climate change in a June report put forward by Ceres, a nonprofit environmental advocacy group.

But her positions on climate and the role it should have in economic policy could also make her a more difficult pick to get through the Senate.

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Roger Ferguson

One of only a handful of Black CEOs leading Fortune 500 companies today, Roger Ferguson would be a historic choice as Treasury secretary just like Raphael Bostic, president of the Federal Reserve Bank of Atlanta.

As a member of the Federal Reserve Board of Governors, including as vice chair from 1999 to 2006, Ferguson helped lead the central bank’s immediate response to the 9/11 terrorist attacks.

Former Fed Chair Alan Greenspan once called Ferguson “one of the most effective vice chairman in the history of the Fed.”

But Ferguson’s longtime proximity to Wall Street at the top of TIAA — a trillion-dollar asset manager specializing in financial services for academics and nonprofit industries — could draw skepticism from the Democratic Party’s left flank.

Janet Yellen

Former Federal Reserve Chair Janet Yellen is also reportedly in the running for Treasury secretary. Yellen served as both chair and vice chair of the Fed, as well as president of the Federal Reserve Bank of San Francisco and chair of the White House Council of Economic Advisors under former President Bill Clinton.

At the Fed, Yellen presided over the central bank’s decisions to raise interest rates as the economy recovered from the financial crisis. She arguably helped to usher in the economic expansion, which included growth in wages and jobs that continued under current Fed Chair Jerome Powell.

Her policy stances leaving the government could be influenced by the groups she has joined like the Committee for a Responsible Budget and its Fix the Debt coalition, as well as the Climate Leadership Council and the Washington Center for Equitable Growth. Yellen is also a fellow at the Brookings Institution.

Yellen could appease both progressives and conservatives, helping her win Senate confirmation. When she was confirmed by the Senate for Fed chair, she won support from key Republicans like Sens. Susan Collins of Maine, Lisa Murkowski of Alaska and Richard Burr of North Carolina.

Raphael Bostic

Bostic, president and CEO of the Federal Reserve Bank of Atlanta, would be the first Black, and first openly gay, person to serve as Treasury secretary.

An economist and academic who taught at the University of Southern California before leading a regional Fed bank, Bostic was a senior policy adviser in the Department of Housing and Urban Development and before that a senior economist at the Federal Reserve Board.

Following the police killing of George Floyd, Bostic wrote an essay titled “A Moral and Economic Imperative to End Racism,” in which he urged the Federal Reserve System to promote “maximum employment” to help address inequality.

Gary Gensler

Gary Gensler ran the Commodity Futures Trading Commission in the Obama administration from 2009 to 2014. In the Clinton administration, he served as Treasury undersecretary for domestic finance.

Despite having had a senior role at Goldman Sachs, Gensler developed a reputation as an aggressive regulator when he chaired the CFTC, cracking down hard on the swaps industry and leading the agency’s efforts to implement the derivatives provisions of the Dodd-Frank Act.

Gensler’s name has not been named as much as other candidates in connection with serving as President-elect Biden’s Treasury secretary, but he had been seen as a potential Treasury chief if Hillary Clinton had won the presidency in 2016. And he is working with the Biden transition to vet financial regulatory appointees, having been named to lead the review team for banking and securities regulatory agencies.

Gina Raimondo

Rhode Island Gov. Gina Raimondo would be a more centrist pick for Treasury secretary and would have closer ties to Wall Street than some of the other candidates that have been floated.

Before taking office as governor, Raimondo served as the state’s treasurer from 2011 to 2015. Before entering government, she was the senior vice president of fund development at the venture capital firm Village Ventures, and co-founded the early-stage VC firm Point Judith Capital, which is based in Rhode Island.

Raimondo’s gubernatorial campaign received upwards of $1 million in donations from Wall Street, and she was reportedly considered for vice president by the Biden team earlier this year. But she has come under fire as governor for cutting public pensions for state employees, a move that her critics allege steered money to hedge funds and has made her unpopular with labor unions.

Still, under Raimondo, Rhode Island had its lowest unemployment rate in three decades.

Elizabeth Warren

Although Sen. Elizabeth Warren, D-Mass., is reportedly seeking the Treasury secretary job, it’s unlikely that Biden would select her given both the dynamics of the Senate and her progressive stance toward financial policy, which could alienate her from moderates and conservatives.

Before her election to the Senate, Warren made a name for herself as a fierce consumer advocate as chair of the Congressional Oversight Panel for the Troubled Asset Relief Program and for pushing for the creation of the Consumer Financial Protection Bureau.

But Warren would be a difficult pick to get through a Republican majority Senate and would also likely rock markets.

Even if Warren were confirmed as Treasury secretary, she would vacate her seat in the Senate, and as of right now, Republican Massachusetts Gov. Charlie Baker has the ability to appoint someone to fill her seat, and that person could be a Republican. (The Massachusetts state legislature is attempting to pass a law that would compel Baker to choose a replacement that belongs to the same party as the person vacating a seat.)

That would risk adding to a Republican majority if Democrats don’t secure the two Senate seats in Georgia up for grabs in January.

A wild-card pick?

Although the early speculation has not focused on Biden selecting a Wall Street figure to serve as Treasury secretary, the role often goes to financiers interested in making policy. JPMorgan Chase CEO Jamie Dimon was mentioned in 2016 as potentially leading Treasury under President Trump, but Dimon was said to have told Trump’s transition team that he wasn’t interested. The president-elect reportedly considered Dimon along with billionaire Michael Bloomberg when then-candidate Biden was still running in the primaries.

But choosing the next Treasury secretary from the world of high finance could anger the Democratic Party’s progressive base, which would prefer a non-industry cabinet appointee.

Biden could also look at other names for senior economic roles from within his own inner circle. Jaret Bernstein served as chief economist for Biden when he was vice president. Graves, who is leading the Treasury review team as part of the transition, was another adviser to Biden as vice president and now is an executive at KeyBank.

If Biden wanted to look across the aisle, his transition team could eye Sheila Bair, a Republican popular among consumer advocates who formerly ran the FDIC in the George W. Bush and Obama administrations and has worked at Treasury, or even Gary Cohn, a Goldman Sachs alum who headed the National Economic Council for Trump.