IN EARLY 2009Faced with an economic crisis and a large number of jobs to be filled, Barack Obama, the newly-inducted president, went on a hunt for talent. For the role of Treasury Department’s top diplomat, he chose an able economist named Lael Brainard, who had also worked in the administration of Bill Clinton. Ms. Brainard later moved from the Treasury Department’s stately headquarters next to the White House to the Federal Reserve, where she has served on the Board of Governors since 2014. Should Joe Biden defeat President Donald Trump on November 3, she could travel back home. this time to occupy the larger office of the finance minister.
If Mr Biden wins, his choice of team will be watched closely for clues as to how he might rule. His party’s left wing remains skeptical of his commitment to the progressive reforms advocated by Bernie Sanders and Elizabeth Warren, his contenders during the primaries. Conservatives and business leaders, on the other hand, brace themselves for higher taxes and stricter regulations. The appointment of Ms. Brainard to the Treasury Department could help allay every individual’s worst fears.
Ms. Brainard, a accomplished technocrat, was born in Hamburg while her father was serving abroad in communist East Germany and Poland. After completing a P.HD. She graduated from Harvard University with a degree in economics and spent time at McKinsey, a consulting firm, and as a professor at the Massachusetts Institute of Technology. Between terms in government, she was a fellow at the Brookings Institution, a Washington think tank.
Her government stays have earned Ms. Brainard a reputation for competence and tenacity. She led America’s commitment to Europe during the euro area crisis. Although the Zone leaders sometimes opposed the advice of Uncle Sam – whose own missteps had recently thrown the world into financial crisis – they gained respect for Ms. Brainard’s calm but steadfast presence. Her familiarity with the continent and her fluent German may have helped.
She is not a populist; The Democratic left would prefer a Treasury Secretary with more anti-corporate credentials, like Ms. Warren, who is also seen as a candidate for the role. But Ms. Brainard has shown a willingness to oppose Wall Street. At the Fed, she repeatedly voted against measures to ease regulatory restrictions on financial institutions. In 2019, she was the only member of the Board of Governors to back the activation of the countercyclical capital buffer, which is forcing banks to raise capital ratios during the economic boom in order to mitigate risky loans that could fuel financial instability. Earlier this year, Ms. Brainard opposed a measure to limit banks’ dividend payments (to get them to preserve capital) and instead advocated suspending payments entirely.
Mrs Brainard did not reject the interest rate policy. In 2015-18, she voted for a rate hike alongside the majority. However, in early 2016 she urged the Fed to move slowly, warning that rate hikes would exacerbate global financial conditions, the growth-suppressing effects of which could affect the American economy. The argument proved forward-looking as global and American economic growth slowed in 2016, encouraging rate setters to support a slower pace of rate hikes. More recently, she has been an advocate of the Fed’s move towards a more flexible inflation target and a greater emphasis on full employment.
Progressives look askance at parts of Ms. Brainard’s file. While in the Clinton administration, she helped implement the North American Free Trade Agreement and supported China’s entry into the World Trade Organization. Obama’s Treasury Department repeatedly refused to label China a currency manipulator. But both democratic politics and economic orthodoxy have moved to the left since then, and perhaps Ms. Brainard as well. She would likely be far more open to deficit spending than previous secretaries, including Tim Geithner who headed the department during Mr. Obama’s first term. Disputes with Europe over trade and technology can be settled. The demands of the moment are such that Ms. Brainard’s Treasury Department could mark a progressive departure from the norm. ■
This article appeared in the Finance & Economics section of the print edition under the heading “Top Contenders”