In the summer of 2008, Lael Brainard, then vice-president of the Brookings Institution’s think tank, warned that US leadership was in danger of stalling on the international business scene.
It was close to the height of the financial crisis and there was growing skepticism about Washington’s decades of “liberalization agenda” which had pushed for open trade and open markets: Ms. Brainard argued that a change of course was necessary and possible.
“There is good reason to believe that US leadership can thrive if we are thoughtful and adaptable, willing to change the way we work, and are open to real collaboration with other nations,” she wrote in a co-authored paper Article David Lipton, who later served in a senior IMF job.
Twelve years later, Ms. Brainard may need to reapply these teachings as America’s premier post-Trumpian economic officer.
Ms. Brainard, now a 58-year-old Federal Reserve Governor, is one of the top candidates for Treasury Secretary in Joe’s future administration, along with Janet Yellen, former Fed Chair, Sarah Bloom Raskin, former Assistant Treasury Secretary, and Roger Biden Ferguson, CEO of asset manager TIAA.
If selected, Ms. Brainard would break through one of the most rigid glass ceilings in the US government, as no woman has served as Treasury Secretary since the department was first headed by Alexander Hamilton in 1789.
Your first mission would almost certainly be domestically: to ensure that Mr Biden’s ambitious economic agenda, including large-scale incentives to accelerate the recovery, can be properly implemented and passed in a divided Congress.
However, Ms. Brainard also has international expertise and relationships, which makes her a well-known figure in finance ministries and central banks around the world.
Between 2010 and 2013, she was the chief financial officer for international affairs, which was a stepping stone into secretarial positions for both Tim Geithner and Larry Summers. This could mean greater coordination and involvement by Washington in a global response to the impact of the pandemic after the Trump administration’s deep skepticism about multilateral solutions.
“She knows the international side of the Treasury. She knows all the actors at the international level, be it on the regulatory, monetary and diplomatic side, ”said Mark Sobel, former US Treasurer and chairman of Omfif, a think tank of the central bank.
“It’s very hard to imagine someone ticking all of these boxes and being ready to go right away,” he added.
Ms. Brainard was born in Hamburg in the years when her father Alfred was stationed as an American diplomat in Europe, including Germany and Poland.
“I grew up mainly behind and around the Iron Curtain. I think a lot of children are told to watch their manners. In my house the admonition always followed: “Do not forget that you represent America,” she told the Senate Finance Committee in late 2009.
She knows all the players internationally, be it on the regulatory, monetary and diplomatic side
She completed her university education in the USA with a bachelor’s degree from Wesleyan University and a doctorate in economics from Harvard University. After starting her career at McKinsey, Ms. Brainard joined the Clinton administration’s economic team, working in trade, development and serving as the U.S. Sherpa for the 2000 G8 summit.
When Barack Obama won the election eight years later, Ms. Brainard was prepared to return to a top economic job, winning the Treasury Department’s international portfolio at a time when one of the top priorities was to urge Europe to tame its sovereign debt crisis, including strengthening Germany’s spending.
“At that point, the world economy was recovering and it was reported that austerity measures were needed to bring debt down and budget deficits down as quickly as possible,” said Nathan Sheets, chief economist at PGIM Fixed Income and a former treasurer under Mr. Obama. “And the Treasury leaned against it as a risk to demand.”
Their other major challenge was to manage the very delicate economic relationship with China and get Beijing to revalue and reduce its current account surplus.
Under her watch, the US repeatedly refused to label China a “currency manipulator”, which could have led to punitive measures against Beijing. These decisions embodied the politics of engagement rather than confrontation, which was harshly criticized by the growing ranks of Chinese hawks of all political directions in Washington.
During those years at the Treasury Department, Ms. Brainard gained a reputation for being intellectually impressive, extremely tenacious in advancing ideas, and a tough negotiator who doesn’t take no for an answer. “She’s both a doer and a thinker,” said Mr. Sheets.
However, after Hillary Clinton’s defeat by Trump in 2016, the Obama administration’s international economic policy was heavily criticized by the left of the Democratic Party. They claimed it was too market friendly, overconfident about the benefits of globalization, and insufficiently focused on the impact on working class Americans.
Since joining the Fed in 2014, Ms. Brainard has gained more favor with the increasingly influential progressive flank of the Democratic Party, which could make her a tastier candidate.
She has advocated more cautious monetary policy, tighter financial regulation and higher capital standards for banks, which challenged the Fed’s looser policies in a number of disagreements. This could suggest that it is revitalizing the Financial Stability Oversight Council, a regulatory body set up under the Dodd-Frank Act, specifically to oversee the risks to the system from non-banking institutions.
Ms. Brainard also led the US Federal Reserve to revise the law regulating lending to ailing and minority communities to make it more effective, while urging the Fed to recognize climate change as a risk to financial stability.
One reason Ms. Brainard may not be selected as Treasury Secretary is because Mr. Biden would rather see her as Jay Powell’s successor in the role of Fed chairman when his term expires in 2022. Regardless of where she ends up, Ms. Brainard is poised to be one of the most influential economic policy makers of the emerging Biden era.
“She is not going to push for the same guidelines that we might see if someone like Elizabeth Warren were named Treasury Secretary instead,” said Kathryn Judge, a Columbia University professor with expertise in financial regulation.
“But a lot of people develop over time and grow in their thinking. . . Given her recent votes, but also the way she casts her vote, there are indications that she would at least prioritize aspects of the progressive agenda. ”