On Wednesday 20 January, Joe Biden is set to be inaugurated as President of the United States. Alongside him, figures from politics, academia and the military will join his cabinet in the various offices of government.
One name that will be familiar to FT Alphaville readers is former Federal Reserve chair Janet Yellen, who will become Secretary of the Treasury (assuming no madness over the next fortnight).
Yellen’s appointment to the US Treasury is old news at this point. But what has caught the attention of the commentariat over the past week is a list of speaking engagements that Yellen has had since she left her position at the Fed back in 2018.
It’ll be no surprise to our readers that giving speeches is a pretty lucrative gig once you’ve been Fed chair. People want to hear you, and they’ll pay handsomely for the privilege. From Politico:
In the past two years, President-elect Joe Biden’s pick to be Treasury secretary, Janet Yellen, has raked in more than $7.2 million in speaking fees from Wall Street and large corporations including Citi, Goldman Sachs, Google, City National Bank, UBS, Citadel LLC, Barclays, Credit Suisse, Salesforce and more.
Yellen’s financial disclosure is one of three filed by the Biden team at the end of 2020 that could become politically problematic with the leftwing of the Democratic Party when confirmation hearings begin in January. A Biden transition official said they filed the forms “midweek” before the Office of Government Ethics posted the forms late Thursday, New Year's Eve.
The full list is available here, thanks to the US Office for Government Ethics.
It’ll also come as little surprise that Yellen’s corporate lucre has provoked a lot of criticism. Glenn Greenwald tweeted that the appointment proved “Dems are the party of Wall St. They put people in charge of industries who have been enriched by them.” Alexandria Ocasio-Cortez, a Democrat Representative, defended Politico’s reporting, tweeting: “We may not want to admit it, but policymakers’ experiences DO shape their thinking. Is it disqualifying, etc? That’s for public to decide.”
Concerns about the undue influence of big business on government are legitimate. Hundreds of millions of dollars are spent every year on expensive Washington lobbyists to make sure corporate views are heard on Capitol Hill. And we all know about the revolving door between government and big business, which undoubtedly skews the incentive for policymakers to always act in their constituents’ interests.
Yellen, though, is far from the only prominent central banker to have accepted high-paying gigs. Indeed exactly the same charges were levelled (at the Republican-leaning) Ben Bernanke, who served as Yellen’s predecessor. Nor was either enriched by Wall Street prior to entering the Fed — both Yellen and Bernanke spent most of their careers in academia.
Yellen and Bernanke were not exactly raking it in during their time at the US central bank. While the Fed chair is widely seen as the world’s most powerful monetary policymaker, they are paid far less than their counterparts at the Bank of England and the European Central Bank, receiving around $200,000 a year. Bernanke’s salary was less than half of Mario Draghi’s, his counterpart at the ECB, and just a fifth of the amount Mark Carney was paid.
While cashing in is never the best look, it is hard to argue — whatever you think of their policies — that Fed chairs are not civic-minded. Both had already independently built up considerable wealth through the success of their own careers before taking on the role, and could have taken on far more lucrative positions than that of head of the US central bank (although they might have had a hunch that they might find more exciting financial opportunities after taking on the job).
Unlike Yellen, Helicopter Ben advised Pimco and Citadel a little a year after he left the Fed. She, meanwhile, did not take a corporate job in any form after her tenure. Speaking gigs can help build personal relationships. But we would argue that when it comes to tainted Wall Street cash, a speaking fee is far less egregious than a role which opens up the Rolodex. After all, what influence can a corporate exert on an independent contractor on a one-time job? For all we know, Yellen could be gleeful about pocketing huge fees off the banks, chuckling “those suckers” to herself as she once again checks her bulging account statement.
Former central bankers deserve scrutiny, particularly in an age in which they’ve become the “only game in town” driving economic policymaking. But it ought to be Yellen’s capacity to end that era and to put the finance ministry centre stage that defines her success as Treasury Secretary, rather than the amount of money she’s made since leaving the Fed. If fiscal policy can’t reclaim its place in the economic discussion, then perhaps we should revisit those speaking fees in four years' time.
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