ALEX BRUMMER: Yellen stages a comeback at the US Treasury

6 mins read


The last chairman of the Federal Reserve to move from the US central bank to the US Treasury – G William Miller – did so at a moment of turmoil.

In the final years of Jimmy Carter’s presidency, inflation was out of control, unemployment rising and the dollar falling like a stone.

Miller, a former industrialist, was moved to the Treasury and Paul Volcker parachuted into the Fed. The rest is history.

President-elect Joe Biden is relying on Janet Yellen (pictured), who Donald Trump replaced with Jay Powell at the Fed, to get him out of a hole at the US Treasury

President-elect Joe Biden is relying on Janet Yellen (pictured), who Donald Trump replaced with Jay Powell at the Fed, to get him out of a hole at the US Treasury

This time around, President-elect Joe Biden is relying on the 74-year-old stripling Janet Yellen, who Donald Trump replaced with Jay Powell at the Fed, to get him out of a hole. 

She becomes the first woman to occupy the seat once held by founding father Alexander Hamilton whose statue is in the forecourt on Pennsylvania Avenue.

A much respected economist, Yellen’s period at the Fed was characterised by activist monetary policy in the post-financial crisis era, helping to lower the jobless rate. 

Indeed, the current bull market, which has carried the Dow Jones through 30,000 for the first time in latest trading, was kick-started on her watch.

Even though Yellen is more expert in monetary rather than fiscal policy, she is a known quantity on Capitol Hill. Confirmation will be absolutely no problem because she has been through all that before.

As significantly, she knows the hard-line Republican leadership and presumably will find it easier to persuade them that a second Covid stimulus package is necessary.

The effort by Democrats, with support from Trump, to pump a further $1.2trillion into the economy before the election was stifled by Senate majority leader Mitch McConnell and colleagues, as it was focused more on bailing out citizens than business. 

Yellen will be the first academic economist in charge at the US Treasury since Lawrence Summers under Bill Clinton.

Generally, both parties favour Wall Street types in that post. Yellen must largely be considered a conciliator who also recognises the global responsibility of being the custodian of the world’s largest currency.

She knows the US has the extreme privilege of being able to write big cheques and borrow without fear because so many countries including China and Japan hold a chunk of reserves in dollars. 

The patience of dollar investors can be tested but they essentially are stuck with the greenback.

One would expect more respect for financial diplomacy from Yellen, and she would want to see the World Trade Organisation and other international groupings disparaged by Trump come back in favour.

Who knows, she might even favour a UK-US trade deal, chlorinated chicken and the President-elect’s Irish heritage notwithstanding. That would be something.

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Compass has enjoyed such success as UK-based global catering champion that the 75.5 per cent slump in group profits in the year ending in September is startling.

But with offices for firms such as HSBC, Google and Shell locked down, and Chelsea FC playing games in an empty stadium, chief executive Dominic Blakemore has been pushing a medicine ball uphill.

Profit margins, which reached 7.4 per cent in 2019, have been smashed. There was a bit of a revival in the final quarter of the year and with education reopening and health care an important part of the mix firing up, it is not total doom.

Good companies find ways of riding out the storm. Maybe a bit late in the day, but Compass has been quietly acquiring online capacity. 

Its UK delivery site Feedr is gathering momentum, as are parallel brands picked up elsewhere.

Deliveroo doesn’t have to worry too much yet as the targets are SMEs but it has already acquired £300million or so of turnover. 

Compass shares have plummeted over the last year, some 7,000 jobs have gone and the dividend is axed.

But with the firm back in profit, a pipeline of new business, stadiums reopening and vaccines on the way, the worst looks over.

Long goodbye

The post-Tui travel firm life of gruff magnate Peter Long is not proving an unalloyed success. He stepped down as chairman of the Royal Mail after shareholders opposed the fat cat pay of former chief executive Rico Back, who also has been forced out.

Now Long has left his job as executive chairman of estate agents Countrywide after investors rejected his favoured private equity sale. The phone won’t be ringing off the hook any time soon.

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