Janet Yellen on Jobs, Debt, Taxes, Climate and Cryptocurrency
Private-equity executives should also take note: She hinted that she wanted to look at “carried interest,” which allows some financiers to pay taxes on their income at capital gains rates as if they had invested the money themselves.
Ms. Yellen seemed less convinced about a financial transactions tax, which some have suggested could raise $80 billion a year by imposing a small charge on every trade, which would hit Wall Street most of all.
“It could deter speculation, but it might also have negative impacts,” she said.
Ms. Yellen doubled down on a “buyer, beware” message to investors in Bitcoin. “I don’t think that Bitcoin — I’ve said this before — is widely used as a transaction mechanism. To the extent it’s used, I fear it’s often for illicit finance,” she said. “It’s an extremely inefficient way of conducting transactions. And the amount of energy that’s consumed in processing those transactions is staggering. But it is a highly speculative asset, and I think people should beware. It can be extremely volatile, and I do worry about potential losses that investors in it could suffer.”
Ms. Yellen is more interested in the prospect that the Federal Reserve could develop a so-called digital dollar, the first time she appears to have made public comments about that prospect. Crypto supporters may interpret this as an endorsement of the idea — Ms. Yellen’s immediate predecessor, Steven Mnuchin, seemed less interested in it — which shares some of the technologies that underpin Bitcoin and other cryptocurrencies.
“It makes sense for central banks to be looking at it,” she said. “We do have a problem with financial inclusion. Too many Americans really don’t have access to easy payment systems and to banking accounts, and I think this is something that a digital dollar — a central bank digital currency — could help with. I think it could result in faster, safer and cheaper payments.”
There are a number of “issues” to be resolved before central banks get into digital currencies, she said. “What would be the impact on the banking system? Would it cause a huge movement of deposits out of banks and into the Fed? Would the Fed deal with retail customers or try to do this at a wholesale level? Are there financial stability concerns? How would we manage money laundering and illicit finance issues? There’s a lot to consider here, but it’s absolutely worth looking at.”
On the climate
Ms. Yellen has said dealing with climate change is part of a broader mandate for the Treasury, as it is for other departments under President Biden. One of the most fascinating comments she made had to do with the role of financial institutions, and the risk they face by investing or lending to companies that are exposed to climate change.