The most prepared woman in Washington
Janet Yellen is an icon waiting to happen. With her signature silver bob, single-strand pearl necklace, and seemingly infinite supply of jewel-toned jackets (collar popped, always), it’s easy to imagine the new Treasury secretary’s image emblazoned on T-shirts and her silhouette outlined on inspirational Instagram posts. She’s a natural fit as an emblem of the #Girlboss movement that has so finely boiled down modern feminism into a shallow yet marketable vestige of unadulterated capitalism—a conceit used to describe the relentless rise-and-grind schedules of business leaders like Marissa Mayer and Sheryl Sandberg, and to help sell “Notorious RBG” merch to young women. Yellen’s Q score with Gen Y should soon be on the rise.
On Wall Street, meanwhile, Yellen is seen as a known quantity. The former Fed chair is someone who doesn’t make surprise decisions—who says what she’s going to do and then does just that. Big Finance is optimistic that she’ll be a business-oriented leader at Treasury and a friend to markets. That confidence is only bolstered by the fact that Yellen collected more than $7 million in speaking fees from the likes of Goldman Sachs and hedge fund Citadel since leaving the Fed two years ago—a revelation that stirred a bit of controversy among Democrats.
Progressives like to think of Yellen as an advocate for underrepresented Americans. They see her as someone who will push for a higher minimum wage, more regulation of shadow banking, and new legislation in the mode of Dodd-Frank to protect consumers. To liberals, Yellen is someone who will at last put the guardrails on Wall Street.
But no matter what persona is projected onto Yellen—feminist hero, Wall Street savior, progressive darling—the magnitude of her new day job dwarfs all of them in consequence. As Treasury secretary, she is running point for the Biden administration’s efforts to stabilize a teetering U.S. economy that has been rocked by the COVID-19 pandemic. Her decisions over the next few months will have a profound impact on how quickly the economy can rebound.
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The challenges facing Yellen and the rest of President Joe Biden’s economic team are daunting. Though the U.S. unemployment rate has fallen from its COVID peak of 14.7% last April, it plateaued at 6.7% in the final months of 2020, nearly twice as high as a year earlier. The Federal Reserve has already taken rates down to near zero. Thousands of small businesses have closed for good during the pandemic, which continues to ravage the country. And there is rising concern in Washington about continued borrowing to stimulate the economy. The U.S. national debt grew by a stunning $7.8 trillion over the past four years under the Trump administration, driven in part by Trump’s signature 2017 tax cuts and the $3 trillion in stimulus funding Trump signed into law last year. Some Republicans are now using the specter of further debt to push back against President Biden’s proposed $1.9 trillion stimulus bill, dubbed the “American Rescue Plan.”
Yellen is also taking the reins at a Treasury Department that has been greatly reduced in size and capacity under her predecessor, Steven Mnuchin. Between 2016 and 2019, the Treasury’s main offices, including domestic finance, economic policy, and international affairs, saw staffing drop by about 25% as budgets fell. Those departments control responses to the economic recovery, financial policy, and grant programs. Mnuchin operated without a deputy for two years and left the division of domestic finance without an official leader. Yellen will have to bring in a number of people, and quickly, to fill empty positions.
But it’s hard to imagine a leader with more sparkling credentials—or a better demeanor—for the work at hand than the 74-year-old Yellen. Each career peak on her résumé has been seemingly followed by another, higher summit—a mountain range of firsts. Yellen was the only woman in her class to earn an economics Ph.D. at Yale University, and she was then (for quite some time) the sole female economics professor at Harvard University. She served under President Bill Clinton as chair of the Council of Economic Advisers (a rare non-first moment; she was the second woman to serve in that role). In 2014, she was confirmed as the first female chair of the Federal Reserve, under Barack Obama. Now, under President Biden, she’s achieved yet another title: the first woman secretary of the Treasury.
Her new job also makes Yellen the first person—of any gender—to complete the holy trinity of the U.S. finance circuit: Council of Economic Advisers chair, Fed chair, and Treasury secretary.
Yellen has hit the ground running, working with Biden to get his COVID-19 relief bill passed by Congress quickly. In a conversation with Fortune, she underscores the new administration’s top priorities: a successful distribution of at least 100 million doses of vaccine within 100 days; reopening schools; making sure Americans are able to remain in their homes without fear of eviction; and providing a $1,400 stimulus check to a majority of Americans and emergency funding for state and local governments. “It’s a priority to help get us through the pandemic, to get our economy functioning again,” she says of the stimulus legislation.
The new Treasury secretary also echoes President Biden’s calls for both parties to dial back politics in the interest of problem-solving. “I hope very much that we can work in a bipartisan way, Democrats and Republicans, to get beyond this sort of stalemate that has been around for a number of years now,” says Yellen. “I think that many people agree on both sides of the aisle. We need to invest in our people and our infrastructure. We need to solve our competitiveness.”
The business world may be comfortable with Yellen, but she’s no businessperson herself. Unlike Hank Paulson or John Snow, Wall Street execs turned Treasury heads, Yellen is a career economist. And the direction of the stock market is not her North Star. Yellen’s perspective, says Ben Bernanke, the former Federal Reserve chair and now distinguished fellow at the Brookings Institution, isn’t to please any particular interest group. Rather, it’s “how do we get the economy going, and how do we make sure the benefits are spread as widely as possible?”
If Mnuchin was the Beltway’s “most eager man,” as he’s been called, the Brooklyn-born Yellen is Washington’s “most prepared woman.” She certainly won’t be arranging photo ops with sheets of money, as her predecessor did. “She’s got a whole new set of issues that she’s going to have to dig into, and she will,” says Bernanke. “I mean, she won’t be satisfied until she understands exactly why every particular line in the tax code is as unintelligible as it is, what it means, and how to fix that.”
Indeed, Yellen is legendary for her focus. Her colleagues past and present emphasize that their relationship with Yellen is centered wholly around work and shoptalk. She often remarks that people would be bored if they joined her family for dinner, as she and her husband, George Akerlof, who won the Nobel Prize in economics in 2001, usually engage in rigorous work-related discussion. Her son is also in the family business; he received his Ph.D. in economics from Harvard University in 2009 and teaches at the University of Warwick in England.
Bernanke is quick to point out that Yellen prefers to prepare for meetings very, very far in advance. She’s known for showing up to airports hours before her flight; she says that she uses the extra time to read. Adds Bernanke: “She’s a meticulous, cautious, thoughtful person. She speaks quietly. She’s well prepared, and she’s done all of the analysis. But she’s not a shrinking violet, and she’s not afraid to speak up. Sometimes the quietest person in the room is the person you most want to listen to.”
Yellen prefers to read from notes rather than speak off the cuff. As director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, David Wessel has worked closely with Yellen and has seen her speak more times than he can count. He describes her unique procedure for answering audience questions. First, she writes out her response and commits it to memory. Next, she rips up the paper. And finally she speaks.
But Yellen also possesses a rare charisma. Mary C. Daly, president of the Federal Reserve Bank of San Francisco, says Yellen is especially skilled at making people feel seen. “I feel like we’ve met another Eleanor Roosevelt in Janet,” says Daly, who calls Yellen a mentor and a friend. “There can be a room of thousands of people, but when she walks up to the stage, everybody goes quiet, and all eyes are on her. I’ve never seen that happen with anybody else.”
She also makes a habit of asking colleagues for their opinions, even when it’s likely that she already knows what she’s going to do, says Wessel. Yellen may be genuinely curious, but soliciting input also offers colleagues a quick ego rub. And massaging egos is a skill that certainly doesn’t hurt Yellen, who has made a career of being the only woman in rooms full of well-venerated men.
The people sitting around the tables at the G7 and G20 and the IMF like Yellen but also respect her, says Wessel. “Her stature will give her substantial influence in the administration.” That influence will extend to the Oval Office, he predicts. “When she chooses to use it, she’ll have something close to veto power over big economic policies.”
But how exactly she wields that power remains to be seen. Yellen has spent the majority of her Washington career working at the Federal Reserve, an independent agency charged with keeping monetary policy decisions at arm’s length from political influence. As a result, she has been careful about revealing her personal leanings, or much about herself at all.
One event sticks out in Wessel’s mind as a moment when Yellen gave a rare glimpse of her political stripes. It was 2014 and Yellen was nearly a year into her role as Fed chair when she gave a speech on the inequality of economic opportunity to a room full of her peers at the Federal Reserve Bank of Boston. Income and wealth inequality, she said, were near their highest levels in the past 100 years, and the trend concerned her. And then, in an un–Fed chair (and un-Yellen) way, she editorialized just a little. “I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity,” she said.
Yellen knew that reporters were there to cover the talk, but she believed her remarks were relatively benign.
Apparently, she misjudged. Neil Irwin of the New York Times called her words “downright radical.”
“No, that wasn’t Elizabeth Warren, or the editor of The Nation, or Paul Krugman,” began the New Yorker story about the event.
“Everyone [in the government community] knows that Yellen is a liberal Democrat, but that really shouldn’t influence her job as Federal Reserve chair,” commented N. Gregory Mankiw, former economic adviser to George W. Bush and then-chair of the Harvard economics department, to the Harvard Political Review.
Months later, Yellen, who appears to skew much closer to the center of the political spectrum than the far left, reported to Congress to deliver her semiannual monetary policy report. But she found that Republicans were still focused on her remarks in Boston.
“You’re sticking your nose in places that you have no business to be,” scolded future Trump chief of staff Mick Mulvaney, then a Republican representative from South Carolina. Rep. Sean Duffy, a Republican from Wisconsin and former cast member of MTV’s The Real World, accused her of political bias.
A visibly rattled Yellen defended her position. “I am not making political statements,” she said. “I am discussing a significant problem that faces America.”
She didn’t see what she was saying as anything but data-driven analysis. And anyway, “it had been a topic I’d addressed on a number of occasions before,” she tells Fortune.
Yellen experienced a rare setback in 2018 when then-President Donald Trump essentially axed her and replaced her as Fed chair with Jerome Powell. “She was disappointed,” says her friend Wessel. “She thought that Trump liked her and that she had a shot at being reappointed.” Still, she was happy that Powell, a peer she respects, was nominated to do the job.
It’s still unclear exactly why Trump got rid of Yellen. Some speculate that he just didn’t want an Obama appointment at the Fed. Trump told the Washington Post that he thought she was too short to run the Fed. Wessel remembers her joking about the story. The Post said she was five-three when in reality she’s barely five-feet even. She wasn’t going to call in a correction, Yellen told Wessel, but somebody else could feel free to.
In December, Yellen stood next to President-elect Biden in Wilmington, Del., as she accepted his nomination for Treasury secretary. There, in a speech that was uniquely candid for the reserved economist, she offered a window into how she became the person she is today.
Her father, she said, was a dentist who began his business during the Great Depression, setting up shop near Bush Terminal, a group of docks in South Brooklyn. He worked on the teeth of union workers. At the end of the day, he’d discuss their lives with young Janet. If they had lost a job, he would tell her about their financial and family problems, their inability to afford health care, their loss of self-worth.
Those lessons stuck with her “so much so that I became an economist because I was concerned about the toll of unemployment on people, families, and communities,” she said in her speech.
But entering a male-dominated field was not without challenges. “The sexual harassment was ever present,” says Sylvia Ann Hewlett, who received her Ph.D. in economics from the University of London in the early 1970s before teaching at Columbia University. The idea of focusing on gender pay gaps and wealth inequality, as Yellen came to do in her career, was risky at the time, especially for a woman, says Hewlett. “Women had two choices—either they joined the dominant group and didn’t write about it, or you were seen as a sore thumb.”
In that context, it took chutzpah for a female economist to step out of line and raise questions about the accepted wisdom in the field. But Yellen downplays that narrative, and describes her work as a natural evolution.
“When I first went into macroeconomics, the view that I had and had learned in graduate school was that a generally strong economy with a low unemployment rate would benefit workers across the income spectrum—that a so-called rising tide lifts all boats,” Yellen tells Fortune. “But sometime in the mid-’80s that really began to change, and it became no longer true that when the economy was doing well overall that everybody benefited.”
Yellen came to realize that while full employment was still important, it wasn’t enough to address long-term declines in income for the majority of Americans. “And so I have focused for many years on understanding what the forces are that have been making it so difficult for workers to succeed,” she says. “And because such a large share of the workforce hasn’t been able to get ahead, income and wealth inequality has been the theme.”
In 1998, under Bill Clinton, Yellen took the lead on a landmark study, “Explaining Trends in the Gender Wage Gap.” It proved to be a pivotal moment in her career. The paper concluded that women earned 25% less than men, and it was published just as America was celebrating the 35th anniversary of President Kennedy’s signing of the Equal Pay Act. The resulting media attention elevated her profile and eventually helped boost her into her next major role as president of the Federal Reserve Bank of San Francisco in 2004.
While at the Fed, Yellen’s views on racial justice and the economy evolved. In July of 2015, Yellen received some blowback from testimony she gave to Congress that seemed to imply that there was little the Federal Reserve could do to improve disproportionately high Black unemployment rates. Progressive groups and senators pushed Yellen on the topic. She listened.
When she met again with Congress in 2016, she took a markedly different tone. “It is troubling that unemployment rates for these minority groups remain higher than for the nation overall, and that the annual income of the median African-American household is still well below the median income of other U.S. households,” she said. Around the same time, Yellen created a task force to diversify hiring practices within the Federal Reserve itself.
Now Yellen is bringing that same perspective to the Treasury. David Clunie, executive director of the Black Economic Alliance and the executive secretary of the Department of the Treasury under President Barack Obama, has been working with Yellen to ensure that the department is focused on racial inequality while working through COVID-relief programs. Recent surveys found that Latino and Black Americans have experienced economic hardship during COVID-19 two to three times as great as that of white Americans. The pandemic has also had a disproportionate effect on women compared with men. (See “Is America Giving Up on Working Women?”) “I’ve been encouraged by what I’ve seen,” says Clunie. “She seems to have a new freedom to speak in much more outward terms about what this means to her personally.”
Yellen tells Fortune that at the Treasury she will fight publicly to address inequality. But, perhaps thinking back to that contentious 2014 hearing, she has a message for her Republican friends in Congress. “The wage gap and income inequality should not be politicized,” she says. “They’re facts that everyone recognizes.”
It’s also a fact that her new job is more overtly political than any she has held before. Yellen brings to it a distaste for politics as usual and a reverence for data. And that might be just what the economy needs.
Straight from the secretary’s mouth
Yellen outlines four of her top priorities.
The push for a $1.9 trillion COVID-19 relief package is the Biden administration’s chief focus now. But true to form, Secretary Yellen has already outlined her tenure at the Treasury and identified what else she wants to accomplish. Here is what lies at the top of her list.
Tackling income inequality
Yellen believes it’s critical to address the economy’s structural imbalance. “We have an economy where the typical high school–educated worker is barely seeing any wage increase for the last 50 years, and we need to change that and make sure that those workers get the kind of pay they deserve,” she says. That will happen by investing in infrastructure and R&D, and by educating workers so that they have the skills to utilize modern technology. Yellen also plans to focus on small-business loan programs to help boost job creation.
Taking on climate change
Expect a renewed focus on the environment from the Biden team. “Climate change is a big priority. It’s going to be very clearly in focus,” says Yellen. In the past, she’s supported a carbon tax that would charge polluters for emissions and redistribute funds to U.S. households through dividends. Last fall, Yellen cochaired a committee on how to achieve net-zero emissions. Recommendations included shifting incentives for companies to prioritize sustainability and using markets to speed the transition from fossil fuels.
Challenging China on trade
We need to reset the relationship with China, says Yellen, and in order to do so effectively the U.S. will have to work with allies to address common challenges instead of operating unilaterally as the Trump administration preferred. “China is a very strategic competitor,” she says, noting that the U.S. needs to “use an array of tools” to address a number of disruptive actions taken by China, such as “dumping products, erecting trade barriers, and giving illegal subsidies to corporations.” Those actions are “hurting our economy,” she says.
Rebuilding capacity at Treasury
The Treasury budget over the past four years has been “cut enormously,” says Yellen. There has been a reallocation of personnel toward activities ranging from monitoring terrorism and other national security concerns and away from economic security at home. While the former are “important things for us to preserve,” says Yellen, “in the process, other areas of the Treasury have really been depleted.” She will be staffing up Treasury with people dedicated to her overarching mission of addressing structural economic changes.
This article appears in the February/March 2021 issue of Fortune.