Federal Reserve Vice Chair Lael Brainard has been tapped to take over the White House’s National Economic Council, stepping into a new political role that will be instrumental in carrying out President Biden’s agenda.
Brainard was previously considered for other top jobs in the Biden administration, including treasury secretary and Fed chair. But those jobs went to former Fed chair Janet L. Yellen and to Jerome H. Powell, respectively. Powell served his first term as chair under President Donald Trump, then was renominated to a second term by Biden.
Brainard’s move to the White House comes at a pivotal time for the central bank, the Biden administration and the broader economy. The Fed is still in an all-out fight against inflation, and its aggressive rate hike campaign could cause a recession on Biden’s watch. It remains to be seen whether the economy is barreling toward a recession, or if it can narrowly avoid one and spare the labor market — which grew gangbusters in January — from widespread layoffs.
Brainard has been a force in Washington for over two decades, after working as an economist in the Obama and Clinton administrations before she joined the Fed. At the central bank, she has amassed an unusually large portfolio, including when she was the only Democrat on the Fed board through much of the Trump administration. She was also key to the Fed’s emergency response to the pandemic.
More recently, she has called attention to the risks of the Fed going too far in its fight against inflation, especially if the economy slows so much that it needlessly hurts the job market, which is still churning at remarkable speed. That’s a problem, Brainard notes, because of the Fed’s dual mandate of keeping prices stable and also fostering what’s known as “maximum employment.” She has also called attention to how inflation hits poorer families hardest.
“As we get further into restrictive territory, those risks around our dual mandate become more two-sided,” Brainard said in remarks on Jan. 19. “Now we’re in an environment where we’re managing risks on both sides.”
When Biden weighed whether to name Brainard treasury secretary or to tap her to replace Powell as Fed chair, her supporters said she was a match for Biden’s economic agenda. In particular, she built a reputation for being tough on Wall Street, opposing moves to unwind tougher regulations of big banks. This focus stood out within the Fed board, where policy votes are typically unanimous. But in the past few years, Brainard has issued roughly 20 dissents on a range of regulatory issues.
“You could see it in the voting record,” Simon Johnson, an economist at MIT who advocated for Brainard to become Fed chair, told The Washington Post. “I’m sure that was a very lonely struggle. But it was quite effective in slowing things down and made people think more about the consequences of having those regulations [relaxed].”
Brainard was also the driving force on the Fed board on climate issues, including how big banks’ exposure to climate-related risks could threaten the broader financial system and how the Fed could start measuring those risks. She has also said it would be useful for the Fed to provide guidance to large banks in their efforts to measure and curb climate risks.
The Fed’s attempts to modernize the Community Reinvestment Act, or CRA, also fell under Brainard’s purview. Those efforts have put Brainard and the Fed in conflict with other banking regulators, whose proposals to revamp the historic anti-redlining law received pushback from the central bank.
And in 2020, when Brainard was a board governor, Powell brought her into the Fed’s close inner circle — a group traditionally confined to the chair, vice chair and leader of the New York Fed — that shapes the central bank’s agenda on monetary policy.
Before joining the central bank, Brainard served as undersecretary for international affairs at the Treasury Department in the Obama administration and as a top deputy to Treasury Secretary Timothy F. Geithner after the Great Recession. Brainard was a crucial negotiator during Europe’s debt crisis, often exerting her influence behind closed doors.
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 and taught at MIT.
The daughter of a Foreign Service officer, Brainard was raised in Poland and Germany during the Cold War and is fluent in German.