Janet Yellen’s Treasury would be tough M&A arbiter

The former Federal Reserve chair would oversee U.S. national security deal reviews if she becomes U.S. Treasury Department chief. Corporate merger advisers best be ready to buckle in

  
U.S. Federal Reserve Chair Janet Yellen speaks at "The Elusive 'Great' Recovery: Causes and Implications for Future Business Cycle Dynamics" conference hosted by the Federal Reserve Bank of Boston in Boston, Massachusetts, U.S., October 14, 2016. REUTERS/Mary Schwalm

U.S. Federal Reserve Chair Janet Yellen speaks at "The Elusive 'Great' Recovery: Causes and Implications for Future Business Cycle Dynamics" conference hosted by the Federal Reserve Bank of Boston in Boston, Massachusetts, U.S., October 14, 2016. REUTERS/Mary Schwalm

REUTERS/Mary Schwalm - RTSSB01

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

SAN FRANCISCO - Janet Yellen looks set to add a new role to her resume: tough M&A arbiter. The former Federal Reserve chair would oversee U.S. national security deal reviews if she becomes U.S. Treasury Department chief. Corporate merger advisers best be ready to buckle in.

Under President Donald Trump’s administration, national security concerns started to play a bigger role in regulatory deal reviews. In 2018, Congress expanded the powers of the Committee on Foreign Investment in the United States, which is overseen by Treasury, to include reviewing minority investments and deals that would have a foreign entity acquiring certain U.S. online and data firms. The intensified scrutiny helped lead to a 90% drop in Chinese foreign direct investment in the United States from 2016 to 2019, according to the US-China Investment Project.

This likely won’t change under Yellen if her bench is any signal. President-elect Joe Biden has suggested people like Wally Adeyemo to be her No. 2. He was a deputy national security adviser under Barack Obama, and on Tuesday, he said Treasury should be “laser-focused” on its role in protecting national security, including when it comes to foreign investment.

The messy TikTok saga could be the first test. In August, President Donald Trump issued an executive order requiring owner ByteDance to fully divest of the U.S. assets of the video app because of concerns about the Chinese government’s access to its data. The deal has been in limbo as Trump, distracted by the election and its aftermath, hasn’t rubber-stamped the tie-up.

Under the current arrangement, ByteDance has agreed to sell a 20% stake in the app to Oracle and Walmart. This isn’t likely to fly under Yellen. While Biden will set the tone, he’ll be less publicly hands-on than Trump. And so Yellen will execute in the same manner that she leads – with more methodical and less emotional direction.

That means sticking to her guns. If a tie-up between a U.S. and foreign company appears to risk national security, then a hybrid approach to appease all parties just won’t do. She may send TikTok’s bankers back to the drawing board, and when it comes to thwarting deals, that may just be the start.

CONTEXT NEWS

- U.S. Treasury secretary nominee Janet Yellen on Dec. 1 pressed for urgent action on economic support for workers hurt by the pandemic. In an event in which President-elect Joe Biden introduced his economic picks, Yellen said it was also a time to address deeper structural problems like stagnant wages, inequality and racial economic disparities.

- At that same event, Deputy Treasury secretary nominee Wally Adeyemo said the government must remain “laser-focused” on the department’s role in protecting national security, including when it comes to foreign investment policies.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Lauren Silva Laughlin and Amanda Gomez) ((gina.chon@thomsonreuters.com; Reuters Messaging: gina.chon.thomsonreuters.com@reuters.net))

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