Power will move from Wall Street to Washington over the next four years. That's the message being sent by President-elect Biden, with his expected nomination of Wall Street foe Gary Gensler as the new head of the SEC, and and also by Sherrod Brown, the incoming head of the Senate Banking Committee.
Why it matters: Biden is going to attempt to chart an economic policy that's visibly to the left of Bill Clinton and Barack Obama. If he succeeds, it's going to show up not only in taxes and spending, but also in regulation.
What they're saying: "In stark contrast to the prior chairman, Gary will actually look out for Mr. and Mrs. 401k and Main Street investors," says Better Markets CEO Dennis Kelleher. "Gary is the right choice to lead the SEC in a new direction."
Flashback: Clinton was constrained by the so-called "bond vigilantes," who would drive up interest rates if they feared a departure from economic orthodoxy. His most trusted economic advisor was Bob Rubin, a former CEO of Goldman Sachs who believed in deregulation.
- Rubin's acolytes Larry Summers and Tim Geithner, both consummate technocrats, then took over economic policymaking under Obama.
What's new: Economic orthodoxy has moved sharply to the left in recent years. The fears of the bond vigilantes were proved unfounded: Large deficits and low unemployment did not cause any visible uptick in inflation, and a new consensus started to emerge that the biggest danger in economic policy is doing too little, rather than too much.
- What they're saying: Biden said last week that “the overwhelming consensus among leading economists left, right and center is that in order to keep the economy from collapsing this year, getting much, much worse, we should be investing significant amounts of money right now.”
- Axios' Hans Nicholsreports that Biden plans a $3 trillion stimulus plan — on top of new $1,400 checks for most Americans.
- Bank accounts could also start being provided by the government, possibly via the Post Office. Postal banking has long been a dream of progressive legislators — and a nightmare of commercial banks, who fear the reach and convenience that a postal bank would be able to provide.
The big picture: Brown told Axios' Dion Rabouin that former Fed chair and incoming Treasury secretary Janet Yellen has "become a mentor and adviser." Yellen was considered a dovish pick for Fed chair, and she is clearly helping to drive Biden's interventionist economic policy in ways that would have been unthinkable to the likes of Rubin and Summers.
The bottom line: Democratic presidential candidate Andrew Yang said last year that “the magic of Joe Biden is that everything he does becomes the new reasonable.” Biden's economic policy is likely to be extremely aggressive — but, by dint of his naturally moderate personality, it might not be received that way.
