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Who is Lael Brainard? What you need to know about Biden’s Fed vice chair election

US Federal Reserve Board member Lael Brainard speaks after she was nominated by US President Joe Biden to be vice chair of the Federal Reserve, in the South Court Auditorium of the Executive Office Building Eisenhower at the White House in Washington, US, November 22, 2021.

Kevin Lamarque | Reuters

Lael Brainard is usually the more brilliant.

As one of the Federal Reserve’s seven governors, she has made it a habit to oppose inconsistent moves to roll back financial regulation. Until her first protest in 2018, no governor had protested since 2011.

Each year, there are only three other people from her peers without dissent.

One of Brainard’s recent disagreements came in June 2020, when the Fed considered changes to the Volcker Rule, a landmark provision of the Dodd-Frank law on the financial crisis. transaction arrangements of banks with private equity firms and hedge funds.

Brainard voted only against the rule change. The proposals, she warned, could undermine core protections and allow banks to “return to the risky practices seen during the 2008 financial crisis”.

Since Brainard is the only Democrat on the Fed’s board, her objections – just 12 in 2020 – have not been heard.

But now someone is listening. And his name is Joe Biden.

The president has selected Brainard as vice chairman of the Fed, one of the most powerful economic positions in the world and perhaps the obvious heir to the presidency of the Federal Reserve. On Monday, Biden selected Chairman Jerome Powell Fed leader for a second term.

The Fed vice chair’s job has an impact on how interest rates are set, the balance of employment versus inflation, and the direction of regulation for the nation’s biggest banks, such as JPMorgan Chase and Co. of America and Wells Fargo.

“While there is still much work to be done, we’ve made significant progress over the past 10 months in getting Americans back to work and getting our economy back on track. That success is testament to that. testimony to the economic agenda I pursued and was decisive Actions the Federal Reserve took under Chairman Powell and Dr. Brainard to help get us through a bad recession worst in modern American history and set us on a path to recovery,” President Joe Biden said in a prepared statement.

“As I said before, we can’t go back to where we were before the pandemic,” he added. “Together, they also share my profound belief that urgent action is needed to address the economic risks posed by climate change and to anticipate emerging risks in the system.” our finances.”

A spokesman for the Federal Reserve declined to be interviewed by Brainard.

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Biden on Monday announced his intention to nominate a 59-year-old man Brainard served as Powell’s deputy to help manage the US economy through soaring inflation, a steady but uneven recovery, and a sluggish workforce.

Brainard was reportedly being considered for the top job in the days leading up to the White House announcement. But Powell, a Republican, has won praise from leaders in both parties for the Fed’s actions in 2020 to provide cash to the economy as businesses nationwide. closed due to Covid-19.

Economists say near-zero interest rates and the Fed’s $120 billion monthly purchases of Treasuries and mortgage-backed securities have saved the US economy from an even deeper recession and are the reason key for a faster-than-expected recovery.

Ahead of Monday’s announcement, Wall Street speculated Brainard could also be appointed Vice Chairman of the Fed’s Supervisory Board, the central bank official in charge of running banks. The White House said on Monday that the president would announce his candidacy for that job at some point in December.

“While Brainard missed out on the top job this time around, the nomination of her as vice president in charge of monetary policy instead of vice president of oversight and regulation as many speculated put her at the core. in future Fed policymaking and positioning her as a potential future Fed, said Krishna Guha, head of central banking strategy at Evercore ISI.

Senator Elizabeth Warren (D-MA) questions Treasury Secretary Janet Yellen and Federal Reserve Chair Powell during a Senate Banking, Housing and Urban Affairs Committee hearing on the Act. CARES, at the Hart Senate Office Building in Washington, DC, USA, September 28, 2021.

Kevin Dietsch | Reuters

The administration’s decision to promote Brainard was in part thanks to radical lobbyists and Democrats like Thank You Elizabeth Warren of Massachusetts, Sheldon Whitehouse of Rhode Island and Jeff Merkley of Oregon.

During the summer and fall, Warren encouraged Biden to find a tougher Fed chair for banks and stay away from Powell, who she calls “dangerous”. Others, including Whitehouse and Merkley, have pushed for a candidate considers climate change a serious threat and will reframe how banks view its risk.

In recent months, Brainard has given speeches on topics including climate change and the racial-based economic disparities that have exacerbated the Covid-19 pandemic.

She told Harvard students in February that while the Labor Department’s headline unemployment rate is a useful metric, it tends to mask inequality in isolation. Instead, she said, she views broad-based and inclusive maximum employment as an “important guide to monetary policy.”

Some see such speeches as an unsophisticated attempt to distinguish themselves from Powell, who has been reluctant to extend the Fed’s jurisdiction to topics that could be seen as partisan.

“Brainard is Biden’s obvious choice as Chairman because he hasn’t given up on Powell,” PNC Chief Economist Gus Faucher said in an email. “The difference between Powell and Brainard on monetary policy is not significant, but Brainard is generally more austere in the banking industry than Powell. It was a surprise move when Brainard was appointed VP. President, not the Vice President of Supervision.”

Senate Banking Committee Chairman Sherrod Brown, D-Ohio, was quick to applaud Biden’s decision to promote Brainard. His committee is expected to introduce both Powell and Brainard to the broader Senate, where lawmakers are expected to confirm both appointments by wide margin.

“Dr. Lael Brainard has dedicated his life to fighting for a stronger, more equitable economy – one where workers share in the growth and prosperity they create and where whose hard work is not being gambled away by reckless Wall Street banks,” he said in a statement.

Senator Pat Toomey, the committee’s top Republican member, praised the president’s decision to step down from Powell and said in a statement that although he had some concerns about the trend in favor of Mr. Brainard’s more banking regulations, he looked forward to seeing her to talk.

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The Fed has long valued its political independence.

Board members serve 14-year terms in part to keep them out of the day-to-day wishes of elected officials. But that power is given with a narrow mission: Use monetary policy to maximize employment, stabilize prices, and moderate long-term interest rates.

Brainard did not always appeal to the progressive wing of the Democratic Party.

Just 12 months ago, with speculation swirling about who Biden might pick as his Treasury Secretary, some progressives suggested that Brainard was too dovish for the role.

Revolving Door Project Executive, Jeff Hauser make a case against Brainard in a blog post dated October 15, 2020.

“We need a Secretary of the Treasury who can outmaneuver the Democratic technocrats of the Bill Clinton and early Obama eras over the budget deficits that his counterparts and colleagues write,” he and his colleagues wrote. Brainard’s colleagues such as Robert Rubin and Tim Geithner have demonstrated.

“Brainard has proven she won’t meddle on climate issues at the Fed. How can we trust that she will, as Treasury Secretary?” they added. The Revolving Door Project is part of the Center for Economic and Policy Research, a left-wing think tank.

Federal Reserve Chairman Jerome Powell poses for a photo with Fed Governor Lael Brainard (L) at the Federal Reserve Bank of Chicago, in Chicago, Illinois, U.S., June 4, 2019.

Ann Saphir | Reuters

Brainard also pressed case for a digital dollar and is considered the leading voice on financial innovation at the Fed. She said at a spring conference that central bank-backed cryptocurrencies could make it easier for nearly a fifth of Americans considered “underbanked” to provide services.

“The Federal Reserve remains committed to ensuring that the public has access to safe, reliable and secure means of payment, including cash,” she said at a conference presented by Coindesk. presented in May. “As part of this commitment, we must explore – and attempt to predict – the extent to which the needs and preferences of households and businesses can transition to digital payments by the time.”

Academic and political genealogy

Brainard is no stranger to the Fed and has served on its main executive body, known as the Board of Governors, since 2014. If confirmed by a Senate majority, Brainard will serve as vice chairman in four years after incumbent Vice President Richard Clarida. The term will expire next year.

Her life and career are marked by international relationships.

Brainard was born in Hamburg, Germany, as a Foreign Service agent and grew up in East Germany and Poland during the Cold War. Her education culminated in a Ph. in economics at Harvard in 1989.

Her research focuses on the relationship between international trade policies and employment. She worked for the Clinton administration’s National Economic Council during the 1990s, when she was one of the president’s chief advisers to the Group of Eight industrialized nations.

https://www.cnbc.com/2021/11/22/who-is-lael-brainard-what-to-know-about-biden-fed-vice-chair-pick.html Who is Lael Brainard? What you need to know about Biden’s Fed vice chair election

Sarah Ridley

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