Trouble at Treasury
Will Wall Street control the key subcabinet jobs? The early signs are not encouraging.
BY
ROBERT KUTTNER
NOVEMBER 30, 2020
Federal Reserve Chair Janet Yellen in a Financial Stability Oversight Council meeting, May 2015
Progressives rejoiced when former Fed chair Janet Yellen was named to be President-elect Biden’s Treasury secretary. She’s far better on the whole range of policy issues under Treasury’s purview than any of the other contenders.
But not so fast. Will Yellen be master in her own house, and who will control the all-important subcabinet positions like the undersecretary for international affairs, the key regulatory posts, and the IRS commissioner?
The early signs are not auspicious. Almost lost in the welter of top economic jobs leaked to the
Times,
Post, and
Wall Street Journal by the transition staff on Sunday (the
Prospect reported most of these earlier in the week) was an unfamiliar name, Adewale Adeyemo, known as Wally. He is to be Yellen’s deputy Treasury secretary.
Who is Wally Adeyemo? If he is typical of what’s coming, we can expect that what the Biden team gives progressives with one hand, they may take away with the other.
Adeyemo, 39, came to the U.S. as a child from Nigeria with his parents. He excelled in school, graduating from the University of California and then Yale Law School. While at Yale, he worked in the Obama campaign. He joined the administration while still in his late twenties, working for then–Treasury Secretary Tim Geithner.
Among the red flags for progressives is the fact that after leaving government, Adeyemo followed a well-worn path of Obama alums seeking to cash in, and went to Wall Street. And not just anywhere on Wall Street—he went to BlackRock, the world’s largest financial firm with $7 trillion under management, where he served as a political adviser and for a time as chief of staff to CEO Larry Fink.
So Adeyemo begins with a conflict of interest, since Fink’s top priority is to prevent BlackRock from being designated as a systemically important financial institution (SIFI), which would subject it to a higher level of regulatory scrutiny. The Treasury is the key player on this decision, and scores of others that affect BlackRock’s business model.
And there are more red flags. Before joining the Obama administration, Adeyemo worked at the Hamilton Project. That’s the outfit housed at Brookings and created and underwritten by Robert Rubin to promote a very centrist and Wall Street–friendly brand of watered-down liberalism.
Adeyemo subsequently worked for Treasury Secretary Jack Lew as his deputy chief of staff in 2015. Lew is another Rubin protégé. In between Lew’s two stints in government (Clinton, then Obama), Lew was chief operating officer at Citigroup, where Rubin was a top executive.
(Why does Rubin turn up just about everywhere in launching and promoting the careers of the wrong kind of Democrat? That’s not just a rhetorical question but a deeply structural one, if you want to understand the corruption and political failures of the Democratic Party.)
Following his post at Treasury, Adeyemo took a version of the key international economics post once held by Rubin protégé Mike Froman, serving on both the NSC and the NEC as the international economics chief. He was a key negotiator on the late and little lamented Trans-Pacific Partnership, the brainchild of Froman, and the quintessence of the corporate brand of “free trade” deal.
From there he went to BlackRock. After two years at Black Rock, Adeyemo became the first president of the Obama Foundation.
His trajectory offers a perfect rendition of the Washington–Wall Street revolving door. Can we imagine Adeyemo urging tougher regulation of BlackRock?
But here the plot thickens, for there is one anomalous green flag in Adeyemo’s career: his cordial relationship with Elizabeth Warren.
After the Dodd-Frank Act passed in 2010, it included Warren’s creation, the Consumer Financial Protection Bureau. Warren was designated as the interim chair. Geithner assigned Adeyemo to work with Warren as the bureau’s executive director.
Warren and Adeyemo have maintained a good relationship, and I have confirmed with Warren’s staff that she will support his nomination to Treasury. So we will likely get a number two at Treasury on close terms with two opposites—Larry Fink and Elizabeth Warren.
Adeyemo thus personifies the core split in the Biden administration. We will see how he straddles it.
What sort of person works for both Elizabeth Warren and for Larry Fink? We will soon find out.
But back to Janet Yellen. Will she be steamrolled by the Wall Street–friendly senior people in Biden’s inner circle, in terms of who actually controls the Treasury Department?
Yellen’s background in government is at the Federal Reserve. Next to the Supreme Court, the Fed is the most autonomous branch of the government.
At the Fed, Yellen could run the place, subject only to keeping a working majority of the Fed’s other governors. She didn’t need White House permission, and the White House did not impose senior staffers.
The choreography in subcabinet appointments to Cabinet department is more ambiguous. Strong Treasury secretaries, such as Robert Rubin—him again!—are clearly masters in their own houses. Nobody imposed subcabinet officials on Rubin. Weaker secretaries end up being in charge of a department they don’t entirely control.
As a veteran of executive branch politics and policies, and as a former aide to two Treasury secretaries, Geithner and Lew, Adeyemo knows the department far more intimately than Yellen. And still to be filled are several key undersecretary and assistant secretary posts.
So far, Larry Fink of BlackRock has scored two key posts at the very top of the Biden administration—Brian Deese as head of the National Economic Council, and Adeyemo at Treasury.
Like the Democratic Party, Adeyemo is an ambiguous figure. He could be yet another Wall Street fox in the Treasury chicken coop. Or, like Yellen, he could be a Warren ally. Maybe both.
What sort of person works for both Elizabeth Warren and for Larry Fink? We will soon find out.
One Wall Street alum who turned out to be a progressive, Gary Gensler, is still being touted for a top economic-policy slot. But it takes a rare person with Wall Street connections to turn against old chums.
Let’s hope Yellen has plenty of influence over the next round of Treasury appointees.
