Who is Lael Brainard, the incoming vice chair of the Fed?

HEAD OF THE Federal Reserve, America’s central bank, is the most important job in global economics. That is because of its unmatched influence over financial markets in America and, by extension, the world. On November 22nd President Joe Biden chose continuity by announcing that he would nominate the Fed’s current chairman, Jerome Powell, for a second term. At the same time, Mr Biden said he would nominate Lael Brainard, a Fed governor, as vice-chair. She had been in the running for the top job. Who is she, and what does her appointment mean for the economy?

Ms Brainard, a Harvard-trained economist, has sat on the Fed board since 2014. She has been in and out of government jobs since the 1990s, including, under Barack Obama, as the Treasury department’s undersecretary for international affairs—in effect, America’s most senior economic diplomat. At the Fed she has emerged as the strongest voice for stricter regulation of the financial industry.

Last October, for example, she criticised an easing of liquidity requirements for banks, warning that cash buffers are needed to prevent banking mishaps from posing a “serious contagion risk” to the wider economy. She has also dissented from rule changes allowing banks to engage in more proprietary trading and to hold less capital. A report in July by Better Markets, a group that calls for more supervision of Wall Street, praised Ms Brainard, noting how rare it was for a Fed governor to vote against the majority on regulatory decisions.

Her record has also earned her support from the progressive wing of the Democratic Party. Elizabeth Warren, an influential senator, has commended Ms Brainard for her “strong and powerful dissents”, while calling Mr Powell a “dangerous man” because of his penchant for cutting regulations. But many of the left-wing Democrats who like Ms Brainard today were opposed to her one year ago when she was in the picture as a candidate for Treasury secretary, a job that eventually went to Janet Yellen (a former Fed chairwoman herself). Some pointed to her time in the Obama administration, when she helped to craft trade deals seen as unhelpful to workers. Others castigated her for failing to do enough on environmental concerns while at the Fed. And despite her current reputation as a Fed outsider, Ms Brainard is a consummate Washington insider. Her husband, Kurt Campbell, is Mr Biden’s top adviser on Asia. She is not quite the progressive darling some have made her out to be.

With Mr Powell securing a second term, it is not clear that the most consequential part of the Fed’s work—its management of monetary policy—will change much. Mr Powell has been very doveish and is only now guiding the central bank towards gradual tightening, though inflation is running at its fastest pace in more than a decade. Ms Brainard might be inclined to wait even longer before ending the Fed’s ultra-loose monetary policy, but as vice-chair she will have just one vote out of twelve on its rate-setting committee. Mr Biden’s decision to promote her is a compromise. It gives markets what they want: continuity in the form of Mr Powell’s chairmanship. It also gives progressives at least some of what they want, elevating Ms Brainard to a more prominent position, albeit not the most important job in the global economy.

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