The stock market rallied and financial stocks moved to the highs of the day as news of her pending nomination leaked out. Sources familiar with the matter told CNBC Monday afternoon that the president-elect had chosen Yellen, who was believed to be under consideration along with Fed Governor Lael Brainard and former Fed Vice Chair Roger Ferguson.
“There’s so many outcomes that could have been worse for the banking sector. For me that was the real risk of that Treasury secretary appointment was you could get someone that was hawkish on the banking sector,” said Barry Knapp, director research for Ironsides Macroeconomics. One market fear was that Biden could have nominated someone like Sen. Elizabeth Warren, D-Mass., who is outspoken about regulating banks.
“Yellen talked a lot about higher bank capital levels early in the [financial] crisis, but I think she’s a pretty benign outcome for the banking sector. When we’ve had problems with that position in the past, in both Republican and Democratic administrations, it’s been when there were people who didn’t understand economics and taxes,” Knapp said.
Ed Mills, Raymond James Washington policy analyst, said Yellen does have credentials that show she can be tough on enforcement. She conducted bank stress tests while on the Fed and took enforcement action against Wells Fargo.
Yellen, a labor economist, will likely be a strong advocate for fiscal support, rather than someone seen as partisan. “So overall, if the result is less partisan, more focused on economic recovery, and someone the market is comfortable with — I would say that is a positive development for the market, but more importantly for the economy as a whole,” Mills wrote.
Reference: CNBC
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