Janet Yellen excelled in great work. This will be the hardest though.

One particularly noteworthy area will be fiscal policy – the power of taxation and spending, which will soon be partly under the care of Ms Yellen – and the area of ​​former monetary policy, the relationship between money supply adjustment. These lines became more blurred this year. The pandemic response was organized as a joint effort by the Treasury Department, which spends billions of dollars to support debt markets, and the Fed, which administers the programs and lends billions from its own unlimited balance sheets to further support them. strong.

But so far there have been clear tears. The Fed was more willing to structure programs to better help the economy, but there was a greater risk of the Treasury losing money, while the Trump Treasury was more cautious.

Meanwhile, the Fed buys huge sums of Treasury bonds and keeps interest rates close to zero indefinitely, trying to stimulate the economy – and effectively giving the government carte blanche to spend on the pandemic if necessary. He raises a lot of questions about how independent the central bank is in times of crisis and be from other members of the government.

Ms. Yellen permeates these issues among the Fed’s institutional values, where she began her career as a young researcher. He served as president, vice president, and head of the central bank’s San Francisco governor for four years. He and Jerome Powell, the current president of the Fed, have been colleagues for many years. He was entrusted with much of the difficult, charming work involved in overseeing the central bank’s operations.

When he and Mr. Powell have regular breakfasts and lunches, which is typical of those at work, it will be ironic that he, as an economist, gets a more conventional overview of a Fed chair and is a lawyer and former Wall Street and Treasury official working conditions are more typical. To the secretaries of the Treasury.

Still, expect it to push for a more liberal use of emergency credit facilities to support the economy, while maintaining the relatively traditional notion of the importance of Fed independence and the ability to shape monetary policy without being reassured by political authorities a second time. The Treasury Secretary, who is less attached to the Fed, has a more flexible view of the role of the two organizations.