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Senate Confirms Lael Brainard As Fed’s New Vice Chair. Here’s What We Know.

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Topline

The Senate on Tuesday confirmed President Joe Biden’s appointment of Federal Reserve Gov. Lael Brainard as the central bank’s vice chair, elevating one of the Fed’s most outspoken climate change critics to a post overseeing bank regulation and monetary policy amid the highest inflation rate in 40 years.

Key Facts

In a vote of 52 to 43 on Tuesday afternoon, the Senate confirmed Brainard, the sole Democrat on the Fed’s seven-member board, for a term ending in early 2026; she succeeds Richard Clarida, whose first term expired on January 31.

Earlier this month, Brainard, 58, said the central bank would raise rates “expeditiously” and expressed confidence in the Fed’s ability to cool rising prices, saying “it is of paramount importance to get inflation down.”

A Fed governor since 2014, Brainard becomes just the third woman to serve as Fed Vice Chair, preceded only by Treasury Secretary Janet Yellen, who was appointed by Obama and also served as Fed Chair from February 2014 to February 2018, and the late Alice Rivlin, who served as vice chair from June 1996 to July 1999.

As scrutiny over individual stock trades cast doubts on Clarida’s potential reappointment, Brainard became many progressives’ pick to head up the Fed thanks to her bold stance on climate change, especially compared to Jerome Powell, who has said the Fed has only a “narrow mandate” on climate change.

In October, Brainard outlined an early blueprint for climate-related stress tests for large financial institutions akin to the required stress tests brought on after the Great Recession to assess banks’ capital requirements.

While discussing the “first generation” of such tests, Brainard said it will be “important” to begin systematically assessing financial institutions’ resilience to climate-related risk scenarios, citing the record-high cost of U.S. weather disasters over the last five years of $630 billion.

Key Background

A Harvard-trained economist, Brainard led the Treasury Department’s international affairs from 2010 to 2013 and served as the deputy national economic advisor to former President Bill Clinton. In addition to her active stance on climate change, she became one of the Fed’s most outspoken critics of wealth inequality. In a recent email, Oanda analyst Craig Erlam noted Brainard is much more dovish than Powell, meaning she’s generally more willing to keep monetary policy accommodative—through low interest rates and quantitative easing, for example—in order to stimulate more economic activity. “Ordinarily, that would make her the stock market’s pick, but that may not necessarily be the case if investors view inflation as a greater risk than the central bank perceives,” says Erlam.

What To Watch For

A vote to confirm Jerome Powell for a second term is also expected this week.

Tangent

Late last year, Brainard emerged as a top Fed Chair contender as progressive Democrats mounted an effort to unseat Powell, who’s repeatedly stated climate change is not a top priority for the Fed. Biden reportedly interviewed Powell and Brainard for the position in early November, and for weeks struggled to make a decision. At the time, Sens. Sheldon Whitehouse (D-R.I.) and Jeff Merkley (D-Ore.) urged him to pick a chair who believes “fighting climate change is the responsibility of every policymaker,” adding: “That person is not Jerome Powell.”

Chief Critic

“I have a lot of serious concerns about Gov. Brainard if she were to be nominated to be chair,” Sen. Pat Toomey (R-Pa.), the top-ranking Republican on the Senate Banking Committee—which must approve Fed nominations—said ahead of Brainard’s nomination after she suggested the central bank should help fight climate change through increased bank regulations. “That would be beyond the scope of the Federal Reserve’s mission,” Toomey wrote in a letter criticizing Brainard’s suggestion.

Further Reading

Fed’s Brainard Lays Out Early Blueprint For Climate Stress Tests (Forbes)

Fed Governor Lael Brainard Slams Stablecoins, Calls For New Focus On Digital Dollars (Forbes)



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