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Senate confirms Lael Brainard to be Federal Reserve vice chair

More votes are expected as soon as this week on Biden’s other Fed nominees, including Jerome H. Powell to a second term as chair.

President Biden announces he is nominating Jerome H. Powell, left, for a second four-year term as Federal Reserve chair and Lael Brainard, right, as vice chair, the No. 2 slot at the Federal Reserve, in Washington in 2021. (Susan Walsh/AP)
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Federal Reserve governor Lael Brainard was confirmed to the Fed’s No. 2 role on Tuesday, rising in the leadership ranks as the central bank attempts to rein in the highest inflation in 40 years without wreaking havoc on the economy.

Brainard, who has been on the Fed board since 2014, is the first of President Biden’s Fed nominees to be confirmed by the full Senate by a vote of 52-43. She was also the only other serious contender for Fed chair.

Brainard has been the Fed’s leading voice for tighter oversight of Wall Street, opposing policies that loosen rules put in place to safeguard the financial system after the Great Recession. She has also warned about how climate change can hinder economic activity and how big banks’ exposure to climate-related risks could threaten the broader financial system.

“I am committed to putting working Americans at the center of my efforts at the Federal Reserve. This means getting inflation down at a time when people are focused on their jobs and how far their paychecks will go,” Brainard said when she was nominated in November.

Seven Republicans voted for Brainard, including Sens. Susan Collins (Maine), Mike Crapo (Idaho), Lindsey O. Graham (S.C.), Bill Hagerty (Tenn.), Cynthia M. Lummis (R-Wyo.), Mike Rounds (S.D.) and Todd C. Young (Ind.). All Democratic senators voted for Brainard, apart from the five who were absent.

Votes are expected as soon as this week on three of Biden’s other picks, including Jerome H. Powell, whom Biden has tapped for a second term as Fed chair.

Higher interest rates could help, Powell says. Not everyone agrees.

Biden has also nominated economists Lisa Cook and Philip Jefferson to open seats on the Fed board. Cook, an economist at Michigan State University, would be the first Black woman on the Fed board. Her work has focused on macroeconomics, economic history, international finance and innovation, particularly on how hate-related violence has reduced U.S. economic growth.

A procedural vote was supposed to help move Cook’s nomination forward on Tuesday. But new covid cases among a handful of Democratic lawmakers have stalled that process, and since no Republicans are expected to vote for Cook, Democrats will have to reconvene with a full roster to tee up the confirmation vote.

Jefferson, an economist at Davidson College, would be the fourth Black man appointed to the board. His research has focused on inequality, how business cycles affect poverty rates and the role of education as a shield against unemployment.

Together, Cook and Jefferson’s confirmations would mark the first time the Fed board has included more than one Black governor at a time.

With new nominees, Biden attempts to assemble most diverse Fed in history

All four nominees are expected to win enough support to be confirmed. But Biden’s original slate of Fed picks was slightly different. Over the past few months, his first nominee to be the Fed’s top banking regulator, Sarah Bloom Raskin, faced staunch opposition from Republicans who initially opposed her candidacy because of her focus on climate change and its threat to financial stability.

GOP lawmakers boycotted her confirmation vote after raising questions about her time on the board of a Colorado payments firm. Soon after, Sen. Joe Manchin III (W.Va.), a key Democratic vote, said he opposed Raskin because of her stance on energy in an era of inflation, all but dooming her path ahead. Raskin subsequently withdrew her nomination.

As a replacement, Biden has nominated Michael Barr, who played a key role in creating the Dodd-Frank Act, financial rules passed in the wake of the 2007-2008 financial crisis. Barr is awaiting a confirmation hearing.

Inflation explained: How prices took off

Biden’s picks would take up their posts during a challenging time for Fed policymaking. Inflation has soared to its highest levels in four decades, and officials are racing to get ahold of rising prices as they seep deeper into the economy. The Fed has set expectations for seven interest rate hikes this year, and will likely green-light a more aggressive hike — 0.50 percentage points — at its meeting next week.

Meanwhile, two years after 20 million people lost their jobs, the labor market is remarkably tight. Such high demand for labor has given workers new leverage to negotiate at work, while also raising wages. But the mismatch between the number of jobs available and the number of people looking for work has the Fed trying to cool demand for workers without hurting the recovery.

Complicating the Fed’s twin challenges of slashing inflation and recalibrating the job market is that the Fed must do it all without cooling off the economy so much that companies lay people off, or triggering a new recession.

The Fed’s ability to steer the economy will play a big role in Biden’s legacy. While the Biden administration has tried to reduce gas prices or control food prices by taking on large corporations, the White House has the most influence over economic policy through its nominees.

High inflation has become one of the most burdensome features of the economic recovery, especially for people living paycheck to paycheck. The rising cost of groceries, gas and rent often serves as a litmus test for how people think the economy is doing. Inflation has been a major drag on Democrats’ poll numbers going into the 2022 midterms, making it more difficult for Biden to rally support for his economic policies.

Brainard, 60, previously served as undersecretary for international affairs at the Treasury Department and a top deputy to Treasury Secretary Timothy F. Geithner after the Great Recession. She also led coordination of the Obama administration’s global economic and financial policy, including during Europe’s sovereign-debt crisis.

Between 2001 and 2008, Brainard was vice president and the founding director of the Global Economy and Development program at the Brookings Institution. She also served as deputy national economic adviser in the Clinton White House during the Asian financial crisis.

She received a PhD in economics from Harvard University. As the daughter of an American diplomat, Brainard grew up on both sides of the Iron Curtain in Germany and Poland during the Cold War.