Lael Brainard’s stance on banking supervision sets an early test for the Fed


if Lyle Brainard On Monday, she was disappointed when she stood in front of the White House podium to accept Joe Biden’s nomination as the vice chairman of the Federal Reserve, but she did not show it.

For several weeks, the 59-year-old Fed governor is considered one of the most talented Democratic economic policymakers of her generation and has been leading the U.S. Central Bank.

But in the end, even the last-hour campaign for the progressive senator could not ensure her holding the top office, Biden confirmed on Monday Reappointment Seated by Fed Chairman Jay Powell.

If confirmed by the Senate, Brainard’s promotion to the Fed’s most important deputy position will enable her to occupy a more prominent position in policy-making, and may become a springboard to become the secretary of the Treasury or the chairman of the Fed in the future.

The role of Federal Reserve Vice Chairman-currently served by Richard Clarida, and in the past by officials such as Donald Kohn, Stanley Fischer and Janet Yellen Serving as an influential person at the central bank, the vice chairman is expected to provide intellectual support for policy initiatives and help signal any changes to financial markets.

Biden showed off his two candidates as a team on Monday, and Brainard-already considered a member of the inner circle of the Fed’s board of directors-said she felt “fortunate” to work with Powell on the Fed’s In response to the response. Pandemic.

But there are some differences between Brainard and Powell that can provide early testing for their new working relationship.

During her seven years as a governor of the Federal Reserve, Brainard was unique in banking supervision and voted more than 20 times in board votes surrounding rule changes that would loosen restrictions on the largest and most important financial institutions.

Her efforts to protect the regulators of the post-global financial crisis won the applause of progressives and made her the preferred candidate for Chairman Powell.

“It is clear that Lyle Brainard has always been a strong opponent of deregulation,” said Jeremy Kress, a former attorney with the Federal Reserve’s Banking Supervision and Policy Group.

Jay Powell (left) with Daniel Tarullo and Lael Brainard at the Fed Board Meeting in 2016 © Associated Press

Her commitment to strengthening the rules on how banks serve disadvantaged communities and pushing the Fed to consider climate-related financial risks more seriously has won further praise among Democrats.

In the days before Biden’s decision, Democratic senators cited Powell’s less powerful approach to such issues as the main argument for rejecting his re-election.

At the same time, some people worry about Brainard-he is considered dovish inflation He also advocates a patient approach to monetary tightening-facts have proved that as prices continue to be high as the central bank’s main focus, they may be more hesitant than Powell in advancing interest rate hikes.

But others emphasized that she is closely aligned with the chairman’s ideas and is well known in policy formulation. “She is not like a stranger from Mars,” said Alan Blind, a former Federal Reserve Vice Chairman and Princeton University professor.

As the economic situation changes, Brainard has also shown signs of adjusting his views. “She has been working at the Fed during challenging times, and her policy stance has forced her to make difficult decisions,” said Randy Kroszner, a former Fed governor, who worked with Bray at Harvard University. Nader has had overlaps. “She is ready to fight.”

On Monday, Brainard seemed to put the fight against inflation at the top of her agenda, indicating that this is by no means a secondary issue of achieving full employment.

“I am committed to making working Americans the core of my work at the Fed,” she said. “This means reducing inflation when people are focused on their jobs and how far their salaries can go.”

Brainard’s policy experience can be traced back to his tenure in the Bill Clinton and Barack Obama administrations. In addition, he has long been engaged in global development work at the Brookings Institution, a Washington think tank.

Under Obama’s leadership, she served as the Deputy Secretary of International Affairs in the Treasury Department. At that time, the United States got rid of the financial crisis and had to deal with the impact of the euro zone sovereign debt crisis that threatened the recovery of the United States.

As Washington’s stance on Beijing began to become more confrontational, she also helped manage economic relations with China.

Brainard was closely involved in the establishment of a new framework for the central bank to formulate monetary policy in 2020. As a result, the Fed will not raise interest rates when price pressure first appears as traditionally, but will run the “hot” economy in an attempt to promote a stronger recovery that will benefit a wider range of Americans.

In practice, this means maintaining interest rates at current levels close to zero until inflation reaches an average of 2% and the Fed maximizes employment. Brainard participates in ensuring that the latter goal is achieved in a “broad and inclusive” manner, effectively promising that this time, as the economy recovers, fewer Americans will be left behind.

Claudia Sahm, a former Federal Reserve economist, said this shift marked a “great change” in monetary policy.

However, just over a year since its launch, the new spell has been under pressure due to soaring inflation. This allows Brainard (if proven) to help adjust the new framework to the economic reality that is very different from when it was announced.

Stephen Secchetti, an economist at Brandeis University who once led the Bank for International Settlements’ monetary and economic department, said that this is a problem that will lead to “difficulties” in 2022.

Bill Inglis, a professor at Yale University and former director of the Federal Reserve’s Department of Monetary Affairs, added: “How do you choose when inflation and employment goals are inconsistent? This problem may soon arise in the next six months to a year. May have to respond to this.”



Source link