One of Janet Yellen’s first engagements as the head of the US government’s main economic department was not with Wall Street, but a Zoom call with civil rights leaders.
It was a fitting start as Treasury secretary-designate for the former Federal Reserve chair, who has spent much of her career advocating for racial equity, often with mixed responses.
Ms Yellen and Wally Adeyemo, who will be her deputy, took notes as the group outlined their recommendations for how the Treasury could better serve black Americans — from diversifying its own staff to reviewing the Internal Revenue Service’s audit practices.
Those who attended said they were pleased with Ms Yellen’s understanding of the economic crisis facing black and brown Americans amid the Covid pandemic. But they expressed reservations about how quickly and dramatically she would implement reforms.
It is a critique that has followed Ms Yellen’s long interest in racial justice issues, from researching unemployment as an academic to pushing for diversity and inclusion while chairing the Fed.
“I understand that as a trained academic she’s supposed to be cautious but this is a moment of crisis,” says Felicia Wong, president and chief executive of think-tank the Roosevelt Institute. “What I heard from her is a recognition that movement is important.”
Civil rights leaders who helped organise the huge election day turnout among African-Americans that propelled Mr Biden into power now want proof of the new administration’s commitment to their interests.
“And especially for those moments when this campaign was at its lowest — the African-American community stood up again for me,” President-elect Biden said during his victory speech on November 7. “They always have my back, and I’ll have yours.”
Since her early years at the Fed, Ms Yellen has been outspoken about the need to better engage people of colour in the economy. She worked to hire more people of colour during her tenure at the Fed and revised performance review practices to help ensure those already there could advance their careers.
The work made the 12 Fed Banks’ boards “moderately less white and meaningfully less male” but there was still much work to be done, said Benjamin Dulchin, who directs a campaign that lobbies the Fed on behalf of people of colour for the progressive advocacy group the Center for Popular Democracy.
After Ms Yellen’s tenure as Fed chair ended in 2018, she took over as president of the American Economic Association, where she started conversations about racism in the field.
Rashad Robinson, president of civil rights non-profit group Color of Change, cited these efforts when describing how he felt when Mr Biden announced his nomination of Ms Yellen: “Relieved.”
“Relieved is not inspired. It’s also not outraged,” said Mr Robinson, who added that he had been in close contact with the transition team during the nomination process and helped co-ordinate Monday’s meeting.
“Throughout her career Janet has broken new ground, and at the helm of the Treasury she will work alongside the entire administration to build our economy back better from the crises facing American families by centring racial and gender equity, promoting diversity and accountability in leadership, and combating income inequality,” Mr Biden’s transition spokesperson Rosemary Boeglin said in a statement.
Ms Yellen’s record of advocacy along with her reputation for open-mindedness put her near the top of Mr Biden’s shortlist for Treasury secretary in the minds of civil rights leaders, a list that also included Fed governor Lael Brainard and Ariel Investments co-chief executive Mellody Hobson.
A real test for Ms Yellen’s attentiveness to communities of colour came in 2015, her second year as Fed chair. She was taken to task by black lawmakers during a hearing with the House Committee on Financial Services in July of that year, while discussing the question of when to raise interest rates for the first time since the financial crisis.
“So, there really isn’t anything directly the Federal Reserve can do to affect the structure of unemployment across groups,” Ms Yellen replied to questions from congresswoman Joyce Beatty on whether stubbornly high unemployment among black people would be factored into her calculation of when the country would near full employment.
“And unfortunately, it’s long been the case that African-American unemployment rates tend to be higher than those on average in the nation as a whole.”
The remarks and Ms Yellen’s eventual decision to raise rates were not well received by progressive economists and activists such as Mr Dulchin, who believe that delaying increasing rates would have sped up recovery in black communities. The memory feeds doubts that Ms Yellen may once again slow stimulus efforts before recovery takes hold in vulnerable populations.
“It’s important that leadership within the Treasury, especially at this moment of huge economic, pandemic, racial justice crisis, sees the power of their bully pulpit,” said Ms Wong. “I want them to utilise all the powers at their disposal to try to help lessen the racial wealth gap and racialised economic outcomes.”
Ms Wong was among the advocates that met Ms Yellen Monday and said she was impressed by the secretary-designate’s knowledge of the systemic nature of the economic challenges that communities of colour face. But she noted that no promises were made about what would happen after Ms Yellen took office.
“I really hope that they see it as a part of their charge as they remake the Treasury to develop a culture within the building to make it a core goal to help solve this problem,” Ms Wong said.
These hopes were bolstered by the selection of Mr Adeyemo, a Nigerian-American who runs the Obama Foundation and worked at the Consumer Financial Protection Bureau under Elizabeth Warren.
Ms Yellen’s success in making the Treasury department work for communities of colour would be measured in part by whether she can secure funding for struggling state and local governments that disproportionately employ black people, and by breaking down more data in the department’s economic reports by race, said Ms Wong.
“I think she has the background to understand those issues,” said Mr Dulchin, “but the question is will she actually take it?”