Wall Street eyes other economic members

Democratic US presidential candidate and former Vice President Joe Biden participates in a campaign program dedicated to reopening the US economy during a coronovirus disease (COVID-19) epidemic in Philadelphia, Pennsylvania, USA on June 11, 2020.

Bastian Slabbers | Reuters

With Janet Yellen for Treasury Secretary, President-Elect Joe Biden must now hand the American economy back to the hands of an economic team charged with the delicate but yet onerous task of nursing for health.

In the coming weeks, the presidential-election will nominate a mix of economists and business leaders to descend the Commerce Department, the Securities and Exchange Commission and the National Economic Council.

He will name the successor of US Trade Representative Robert Lighthizer, Kevin Hassett, chairman of the Council of Economic Advisors, and Kathy Kringinger, director of the Consumer Financial Protection Bureau.

An official of the Biden Transition Team said on Wednesday that the presidential election would be nominated for key economic positions on 2 December.

Major vacancies also remain on the Federal Reserve Board of Governors after failing to confirm a handful of people, including the recently nominated nominee by Senate President Donald Trump. Jerome Powell’s term as Fed Chair expires in 2022, the Biden administration will be quick to open in the future.

Biden chose Yellen, who made history as the first woman to lead the Fed in 2014, as her Treasury Secretary, people familiar with the transition team confirmed Monday. If confirmed, Yellen would also be the first woman in the country to serve as Treasury Secretary.

Raymond James analyst Ed Mills wrote, with Belen’s designated Treasury Secretary for the presidential election as Treasury Secretary, the overall focus on economic recovery and is positive for the market and economy.

“The signal to focus on economic recovery further increases fiscal support in 2021,” he said. “By comparison, Yellen will be a more effective voice for expanded fiscal support than other candidates, who may be seen as more partisan.”

But whoever betrays Biden will do so to hit the ground running with an immediate, involved approach from officials of the uncertain and volatile American Economy Day One Force.

The American economy faced its most drastic, brief recession. Earlier in 2020, when several states closed down unprofessional businesses to help slow the spread of Kovid-19.

Gross domestic product – the value of all goods and services produced in the economy – declined by more than 30% on an annual basis in the second quarter. The unemployment rate rose to 14.7%. And millions of American workers filed for unemployed benefits for the first time.

Although production has partially rebounded since then, the US economy is still about 3.5% smaller than at the end of 2019 and a tough winter war against coronoviruses is expected.

Biden himself has advocated the House Democrats’ $ 2.2 trillion stimulus package to revive the economy. But with Senate Republicans focusing more on the budget deficit and more targeted aid, administration economists may have to look for other ways to support American commerce after the holiday season.

business

Given the narrowings in both congressional circles, PGIM Fixed Income chief economist and former Treasury official Nathan Sheets believes Biden’s choice may ultimately have the greatest impact on everyday Americans.

Sheets, who served as the Treasury’s Under Secretary for International Affairs under the Obama administration, told CNBC that the president has more to do with managing changes in business relations with changes to the tax code that require congressional blessings.

“The USTR stands out as an economic post where issues have to be considered and opportunities loom particularly large,” Sheets wrote in an email.

“The head of the USTR will play a central role in determining governance positions on a broad set of trade policy issues and, moreover, are negotiating desired outcomes with partners abroad,” he said. “These issues include the WTO reform, the nuances of a new US policy on China, and determining the appropriate role for tariffs in the policy toolkit.”

US Trade Representative Robert Lighthizer and Chinese Vice Premier Liu at Beijing’s Diyutai State Guesthouse on February 15, 2019.

Mark Schiffelbein | AFP | Getty Images

Although little is known about who Biden will choose to lead the US in trade discussions, remarks by President-elect and nominated cabinet candidates on Tuesday may provide insight on a multilateral, collaborative-based approach.

“I believe America is the strongest when we work with our allies,” Biden said on Twitter. “This is how we protect this country, combat terrorism and extremism, control this epidemic, deal with climate crises, and more.”

Biden’s choice for Antony Blinken, a career diplomat and secretary of state, erupted on Tuesday after the presidential election.

“Most of the world’s problems are not about us, even as they affect us,” Blinken said. “We need to partner with others.

Biden would achieve a US trade policy marked by a rash of Trump-era taxes on global imports: aluminum and steel in most parts of the world on olives, wine and cheese from Europe, and nearly 75% of everything the US would buy from China is .

(LR) US Vice President Joe Biden, Deputy National Security Adviser Tony Blinken, National Security Advisor Susan Rice and Secretary of State John Kerry as President Barack Obama and Iraqi Prime Minister Nuri al-Maliki Addressing Journalists at the Odys Office in the White House Huh. In Washington, November 1, 2013.

Jonathan Ernst | Reuters

Trade Representative Lighthizer also oversees a more opposition US presence at the World Trade Organization in Geneva, rather than bilateral agreements negotiated through multilateral bodies.

While Biden has not indicated that he will remove some or all of the existing tariffs, both Democrats and Republicans may pressure the incoming president to use the levy or remove them as a strategic advantage. .

Republicans, no longer the free-traders of previous years, would support Democrats’ support in lobbying against potentially unethical, globalized trade relations.

Advisory Council

In addition to electing a business representative, Biden and his transition team will need staff from two advisory bodies: the National Economic Council and the Economic Advisory Council.

Sometimes confused for each other, the NEC and CEA perform similar but different functions for a sitting president.

The NEC, currently directed by Larry Kudlow, was created in 1993 by then President Bill Clinton to assemble a large group of agency and department heads to coordinate economic policy.

The council, whose former leaders include Gary Cohan, Lawrence Summers and Jean Spurling, is often considered to be the presiding group of economic advisors. It is considered a “war room” for economic policy and attempts to sync priorities across government.

President Donald Trump praised Economic Advisor Gary Cohan (L) during a cabinet meeting at the White House, Washington, March 8, 2018.

Kevin Lamarck | Reuters

Given that council members do not require congressional approval, the council can be stacked with business leaders and other industry-friendly confidants.

Sheets of PGIM wrote, “NEC’s closest advisor to the President on major economic issues – someone who is always in the room and important decisions are taken.”

“For Trump, Gary Cohan and Larry Kudlow were confidential advisors – sharing their views behind closed doors – but there were also consistent voices in the media clarifying the administration’s policies,” he said. “In some other administrations, the head of the NEC has done more work to coordinate one-quarter of the behind the scenes agencies and formulate the president’s recommendations.”

The Council of Economic Advisors, by contrast, usually consists of a small team of experts who provide the President’s advice and possible guidelines for economic policy in a setting close to a think tank. His advice runs more academically and provides the White House targets to ponder and venture.

Potential candidates for these councils are many and some of these candidates include economic advisors from outside Biden, including labor economist Jared Bernstein, tax policy expert Ben Harris, and egalitarian scholar Heather Booshee.

American Prospect reported on Tuesday that Blackrock executive Brian Desse is also under consideration for NEC.

federal Reserve

The Biden administration will have a handful of opportunities to nominate candidates in the US central bank.

The Fed, in the midst of one of its biggest asset purchase and lending campaigns, is in charge of setting interest rates and monetary policy. In normal times, officials would increase or reduce the cost of borrowing to cool or spend the US economy, respectively.

But during emergencies, including the Kovid-19 recession, Congress could allow the Fed to deploy extraordinary tools to stabilize markets, provide liquidity to struggling firms, and expand its vast portfolio of securities.

The biggest award for the Biden administration will come in 2022, when Powell’s four-year term ends.

Although Democrat and his team have not criticized policy moves by Republican Powell (who himself has encouraged greater fiscal support from Congress), Biden may choose to nominate an economist with a history of concern for income inequality .

Rafael W. Botikal, President and Chief Executive Officer of the Federal Reserve Bank of Atlanta, speaks at a European Financial Forum event in Dublin, Ireland on February 13, 2019.

Clodagh Kilkoyne | Reuters

A current member of the Fed’s Board of Governors, Lyle Brainard is widely considered to be the successor to the role and reportedly friends have said he would welcome the promotion. The Biden team at one time considered Brendt to be Treasury Secretary before he was reportedly elected to Yellen.

Despite the presidency, the Fed’s board has two vacancies that will eventually need to be filled. Trump either formally or informally nominated some candidates for open positions, including Shelton, Steve Moore and Herman Cain, who died earlier this year.

For different reasons, Trump has not been confirmed by any of the Senate’s recent Fed pics.

Potential Biden nominees could include economist Bernstein as well as Atlanta Fed President Rafael Bestic.

Biologists, an economist whose work has focused on racial inequalities and access to capital, have helped drive those discussions as the first Black president to lead one of the Fed’s 12 regional reserve banks.

Disclosure: Larry Kudlow is a former CNBC contributor.


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