The quiet frontrunner: How Biden landed on Yellen for Treasury secretary

Two days after Joe Biden selected Kamala Harris to be his running mate in August, both Democrats sat down for a virtual briefing on the economic fallout from the coronavirus. They were joined via video conference by a handful of economic experts — two longtime Biden advisers, two from academia and one whose name stood out from the rest: former Federal Reserve Chair Janet Yellen.

The meeting made headlines for being one of the first times the Biden campaign announced who it was turning to for economic expertise. But few at the time predicted that the 74-year-old Yellen was likely to join Biden's Cabinet after a lengthy public sector career that included breaking the glass ceiling as the first female chair of the Fed.

In the end, however, it was Yellen's unrivaled experience, along with her perceived ability to win support across the political spectrum, that made her a top contender within the campaign and transition as far back as the summer, even as others — including Federal Reserve Board Governor Lael Brainard and Roger Ferguson, a former vice chair at the central bank who leads investment manager TIAA — drew most of the speculation.

Above anything else, the president-elect wants to fill senior roles with trusted and well-known advisers and to avoid any shocking surprises, several Biden transition advisers said. The entire theme of the transition is one of calmness and predictability, providing a strong counterpoint to the wild ride of the last four years.

“They have felt, from the get-go, that this made sense,” a former Democratic official familiar with the deliberations said. “I think they have had this in mind for awhile.”

Moreover, senior outside economic advisers to the Biden transition told POLITICO that Biden likes and respects Yellen, grew convinced she would win wide support in the Democratic coalition and would be difficult to impossible for Republicans to oppose should they hold the Senate majority in the next Congress.

Even Sen. Elizabeth Warren, who was hoping to nab the Treasury secretary position herself, privately told the Biden camp that she strongly supported choosing Yellen, according to a person familiar with the exchange.

Yellen's commitment to boosting labor markets and deep familiarity with monetary policy and the role the Fed can play in stimulating the economy were also assets, as was her support for a carbon tax, people familiar with the deliberations said.

The calculus also involved the other leading contenders. Brainard was widely seen as the frontrunner heading into the election. But the Biden team was keen to keep her at the Federal Reserve in order to keep a reliable Democratic voice at the central bank, the former official said.

Brainard is also set to take over the Fed’s regulatory portfolio if the Trump appointee who’s currently in charge, Randal Quarles, leaves when his term ends in October, based on how seniority works at the Fed’s internal committees — so keeping her there would be a natural guarantee against Republicans blocking a new vice chair of supervision. It also leaves her in line to potentially lead the Fed in 2022, when Jerome Powell’s term ends.

The former Treasury undersecretary never heard from the Biden team after the election. Just before news of the Yellen pick leaked, Biden allies — not the president-elect nor his team — told Brainard directly that she wasn't going to get the position because they needed her at the Fed.

Another top competitor for the position was Ferguson, one of the nation’s most prominent Black economists. Ferguson announced in mid-November that he was planning to retire in March from his job as president and CEO of investment manager TIAA, fueling speculation that he was headed to the top slot at Treasury.

Several people familiar with the deliberations confirmed Ferguson was in the mix for the role, and he too would have made history as the first African American to lead the agency. But he was viewed as someone who could raise the ire of progressives, two of the people said, and Yellen was the safer and easier choice.

Progressives, many of whom had pushed hard for Warren and against others including Rhode Island Gov. Gina Raimondo, were largely heartened by the news on Monday.

Adam Green, co-founder of the Progressive Change Campaign Committee, said Biden sent the first signal of where he would land on Treasury secretary and other appointments when he chose Ron Klain, who the Democratic left likes, as his chief of staff. The president-elect, Green said, is “taking the opportunity to find a consensus choice.”

“Again with Janet Yellen, it really sends a signal that he considers progressives to be a collaborative partner,” he said.

Yellen fits neatly into the cast of personnel hires Biden has made so far as he works to build an administration packed with well-respected veterans who have run a government before — many of whom, like her, will make history.

If confirmed by the Senate next year, Yellen will not only become the first woman to lead the Treasury Department, but also the first person to have led Treasury, the Fed and the Council of Economic Advisers.

Tyler Pager, Alex Thompson and Victoria Guida contributed to this report.