President Joe Biden’s selection of Lael Brainard as his top economic adviser fills one big policymaking gap for the White House — and creates another opening for him at the Federal Reserve to shape one of his biggest threats: a volatile economy.
Brainard, named by Biden as director of his National Economic Council, has been an influential force at the central bank for the past decade in setting interest rate policy, including nearly a year as Fed Chair Jerome Powell’s No. 2.
The president’s decision on her successor offers him a chance to select someone who would be gentler on the economy — Brainard, like all the Fed’s voting members, has backed Powell on rate hikes — hoping to avoid a recession before the 2024 election. Gender and racial diversity are also factors, given that Powell and Michael Barr, vice chair overseeing regulatory policy, are both white men.
Powell laid out the “lengthy list” of responsibilities that Brainard has carried at the Fed beyond monetary policy. In a statement, he cited his vice chair’s “stewardship of financial stability and the payments system, strengthening the financial system both domestically and globally, and helping to manage the immense operational agency challenges during the pandemic.”
She earned admirers and detractors along the way from both progressives and Republicans, signaling that Biden’s efforts to replace her could face some formidable obstacles in a closely divided Senate.
Sen. Elizabeth Warren (D-Mass.), who sits on the Banking Committee overseeing the Fed, said she wants someone new at the Fed “soon.” Warren has been sharply critical of Powell’s efforts to kill inflation by cranking up rates at the fastest pace in four decades.
“Chairman Powell continues to signal that he will impose more extreme rate increases, and he still is in a position where he could tip our economy into recession,” Warren told POLITICO. “We need another voice at the Fed to help put the brakes on that.”
Here’s a list of potential candidates who have been the subject of speculation on Biden’s Fed nominee.
The San Francisco Fed president is a labor economist and a close ally of Powell, who will likely be consulted on the choice. She is a potentially strong candidate to succeed Brainard because she’s viewed as being particularly concerned about avoiding damage to the job market — in central bank-speak, a “dove.” She also has ties to Treasury Secretary Janet Yellen, herself a former San Francisco Fed president, who Daly credits with helping advance her career. Yellen is also likely to weigh in on the nominee.
Former President Barack Obama and former Council of Economic Advisers Chair Austan Goolsbee, left, participate in an online chat session in Cleveland, Feb. 22, 2011.