Fed Coordination
Steven Mnuchin, the outgoing Treasury secretary, phased out five emergency Fed facilities at the end of December, something he said was required by the language in the March 2020 Cares Act that set them up.
Democrats sharply disagreed. Republicans sought to prevent any resurrection of the programs with language inserted in the December pandemic aid bill. It’s unclear whether the Biden administration sees a role for fresh Fed initiatives.
Read More: Republicans Will Keep Trying to Limit Fed’s Emergency Loan Power
Yellen more broadly may be asked about the Fed’s intention to keep buying large quantities of Treasuries, and whether the central bank is enabling excessive government borrowing.
“She’s going to have to work out a modus vivendi with the Fed that doesn’t look like a conspiracy and is explicable to Congress,” said Adam Posen, president of the Peterson Institute for International Economics.
Currency Policy
After years of mixed messages on U.S. currency policy, and occasional outright endorsement of a weaker currency, Yellen is facing some pressure to restore the embrace of a strong dollar. But she’s also in the past highlighted the negatives from a strengthening greenback.
Yellen, in her testimony, will affirm the U.S.’s commitment to market-determined exchange rates and make clear the country doesn’t seek a weaker dollar for competitive advantage, the Wall Street Journal reported on Saturday, citing Biden transition officials. Biden transition spokespeople were unable to confirm the report.
The Treasury also oversees a semiannual assessment of U.S. trading partners’ foreign-exchange policies, determining whether they are manipulating their currencies. Mnuchin made three such designations — for China from August 2019 to January 2020, and starting mid-December 2020 for Switzerland and Vietnam.
China Ties
While the Treasury isn’t directly in charge of trade negotiations, the department is typically involved, and the secretary in the past has been the leading economic official in engagement forums with China. It remains unclear whether the Biden administration plans to resurrect some type of regular dialogue and what Yellen’s role in any framework might be.
Regulation, Taxes
The Treasury secretary also usually has a prominent role in setting financial regulatory and tax policy, although many other officials are involved and can take the lead. Biden’s administration is expected to strengthen scrutiny of financial institutions and he has pledged to roll back many of Trump’s tax cuts.
Yellen will also head the Financial Stability Oversight Council, a cross-agency panel designed to monitor risks. She could face questions on strengthening its powers or oversight, and on whether climate change could be a new area of supervision.
—With assistance from Vince Golle, Reade Pickert and Jenny Leonard.
This article was provided by Bloomberg News.