Here’s what you need to know about Lael Brainard, Biden’s pick for vice chair at the Fed

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  • President Joe Biden’s decision to nominate Lyle Brainard as Fed vice president is believed to be the work of progressives who say he will push for climate change and equality.
  • In tapping Brainard, Biden named the 59-year-old to help manage the US economy through a spurt in inflation and a steady but uneven recovery.
  • Brainard has also pitched the case for the digital dollar and is seen as the leading voice on financial innovation at the Fed, such as crypto.

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Lyle Brainard is often an outlier.

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In his role as one of the seven governors of the Federal Reserve, he has made a habit of objecting to otherwise unanimous motions to roll back financial rules. No governor had dissented since 2011, until his first objection in 2018.

Barring a handful of disagreements each year, there have been just three others from his colleagues in recent years.

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One of Brainard’s recent dissent came in June 2020, when the Fed considered changes to the Volcker Rule, a landmark provision of the financial crisis Dodd-Frank law that limits banks’ handling of private-equity firms and hedge funds. does.

Brainard cast the only vote against changing the rule. The proposals, she warned, could undermine core security and allow banks to “return to the riskier activities seen in the 2008 financial crisis”.

As the only Democrat on the Fed’s board, Brainard’s objections – 12 in 2020 alone – went unheeded.

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

The president has chosen Brainard to be vice-chairman of the Fed, one of the most powerful economic positions in the world and perhaps the clear successor to the role of chair of the Federal Reserve. Biden on Monday elected Jerome Powell to lead the Fed for a second term.

The work of the Fed Vice Chair explains how interest rates are determined, the balance of employment versus inflation, and the direction of regulation at the nation’s largest banks such as JPMorgan Chase, Bank of America and Wells Fargo.

“While there is still much to be done, we have made remarkable progress over the past 10 months in getting Americans back to work and getting our economy moving again. This success is a testament to the economic agenda I pursued and the decisiveness I have taken.” “The Federal Reserve has taken action under Chairs Powell and Dr. Brainard to help steer us through the worst recession in modern American history,” President Joe Biden said in a prepared statement.

“As I’ve said before, we can’t return to where we were before the pandemic, we need to improve our economy, and I believe the focus of Chair Powell and Dr. Brainard is on keeping inflation down.” With stable prices, and full employment, our economy will be stronger than ever.” Together, they share my deep belief that urgent action is needed to address the economic risks posed by climate change and stay ahead of emerging risks in our financial system.”

A Federal Reserve spokesman declined to make Brainard available for an interview.

progressive push

Biden on Monday announced his intention to name 59-year-old Brainard as Powell’s deputy to help manage the US economy through a spurt in inflation, a steady but uneven recovery and sluggish labor force participation .

Brainard was considered under consideration for the top job role in the days before the White House announcement. But Powell, a Republican, earned high marks from leaders on both sides for the Fed’s actions in 2020 to cash in on the economy as businesses across the country shut down thanks to Covid-19.

Economists say near-zero interest rates and $120 billion in monthly purchases of Treasury and mortgage securities by the Fed saved the US economy from an even deeper recession and caused a faster-than-expected rebound.

The administration’s decision to promote Brainard to vice chair is thanks to progressive lobbying and Democrats like Sens Elizabeth Warren of Massachusetts, Sheldon Whitehouse of Rhode Island and Jeff Merkle of Oregon.

Throughout the summer and fall, Warren encouraged Biden to find a Fed chair tough on the banks and stay away from Powell, whom he called a “dangerous man.” Others, such as Whitehouse and Merkle, pushed for a candidate who would considers climate change a serious threat and will reshape the way banks consider their risks.

Brainard has delivered speeches in recent months on topics including climate change and race-based economic disparities, exacerbated by the COVID-19 pandemic.

He told Harvard graduate in February That while the Labor Department’s headline unemployment rate is a useful metric, it takes inequalities to be isolated. Instead, she said she considers broad-based and inclusive maximum employment to be a “critical guidepost for monetary policy”.

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Some saw such speeches as a very subtle attempt to alienate Powell, who was reluctant to extend the Fed’s jurisdiction to subjects that could be considered partisan.

Although it was created by Congress and its leaders have been ratified by the Senate, the Fed has long placed a premium on its political independence.

Board members serve a 14-year term, shielding them from the day-to-day wishes of elected officials. but that power is provided with a narrow mandateUse 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 that Biden might be tapped to be her Treasury secretary, some progressives painted Brainard as too moderate for the role.

Jeff Hauser, executive director of the Revolving Door Project Case filed against Brainard In a blog post on October 15, 2020.

“We need a Treasury secretary who can overcome the fixation on budget deficits of Bill Clinton and early Obama-era Democratic technocrats, which Brainard peers and colleagues such as Robert Rubin and Tim Geithner demonstrated,” he and his colleagues wrote.

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

Brainard has also pitched the case for the digital dollar and is seen as a leading voice on financial innovation at the Fed. She told a springtime conference that a cryptocurrency backed by a central bank could make it easier to serve the roughly 1 in 5 Americans considered “underbanked.”

“The Federal Reserve is committed to ensuring that the public has access to safe, reliable and secure means of payment, including cash,” she told a conference presentation presented by Coindesk in May. “As part of this commitment, we should explore – and try to estimate – the extent to which the needs and preferences of households and businesses can move to digital payments over time.”

Academic and political genealogy

Brainard is no stranger to the Fed and has served on its main governing body, known as the Board of Governors, since 2014. If confirmed by a Senate majority, Brainard will serve as Vice Chair for four years, succeeding current Vice Chair Richard Clarida. The term ends next year.

Both her life and career are marked by international relations.

Brainard was born in Hamburg, Germany to a Foreign Service officer and grew up in East Germany and Poland during the Cold War. His education, which culminated in a PhD in economics at Harvard in 1989.

His studies focused on the relationship between international trade policies and employment. He worked for the Clinton administration’s National Economic Council during the 1990s, when he served as one of the chief advisers to the president of the Group of Eight Industrialized Countries.

Following the George W. Bush administration, Brainard joined the US government in 2009 as the Treasury’s Under Secretary of State for International Affairs, making her the highest-ranking woman in the department’s history at the time. As chief diplomat to the Treasury, he represented US interests throughout the global financial and European debt crises.

He resigned from the Treasury position in 2013 after it became clear that former President Barack Obama planned to nominate him to the board of the Fed. He began his 14-year tenure in the central bank in June 2014.

For much of her time at the Fed, her quiet ambition and data-driven work have made her a darling of her Republican allies like Powell. Those qualities have also made him a regular candidate for the nation’s top economic positions, appealing to senators on both sides of the aisle.

But as the Biden administration advances its decision on who to nominate, some believe Brainard’s chances of confirmation have waned somewhat among Republicans.

His recent speech about climate change and other progressive priorities, along with a long track record of supporting bank regulation, is believed to have eroded some support among Republicans over the past 10 months.

Their history of favoring lower interest rates at the risk of fueling inflation – albeit to boost employment – ​​may no longer be prevalent in the economy as consumer prices are rising at the fastest clip since 1990.

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