Top 10 reasons Lael Brainard would be an excellent Fed Chair
Biden will announce his pick for Fed Chair this week. By now, we have heard endless takes on the pros and cons of keeping Powell. Lael is not an alternate to Jay. She's the real deal herself!
As a former Fed economist—one who had the privilege of working closely with Lael Brainard on several projects—I know that she would make an excellent Chair.
Here are my top 10 reasons:
“Broad-based” and “inclusive” are Lael’s words. They are now in the Fed’s strategic framework as its employment target. That’s a dramatic sea change in how the Fed thinks of its dual mandate, and it surely took every ounce of credibility she has at the Fed, which is enormous, to get it. She did.
Lael has the intellectual firepower to create and communicate the theory and metrics for “broad-based” and “inclusive,” as well as “average inflation targeting.” With inflation well above 2%, the Fed must clearly articulate (immediately) what it sees the employment target as and how it thinks about the tradeoffs between inflation and employment. She can do it.
In addition to her contributions to monetary policy, Lael’s wide-ranging portfolio as a Governor touches on all the Fed’s future challenges. Lael is moving us toward the new Fed. She has been a lead Governor on faster payments, central bank digital currency, climate change, and community development. Her hard-hitting, intellectual speeches underscore #2.
Lael’s work on the Community Reinvestment Act was crucial in avoiding the destruction of this key regulatory duty of the Fed. In 1977, Congress charged the Fed along with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Company with ensuring that banks serve low- and moderate-income families and communities. Under her leadership, the Fed rapidly put together high-quality data and analysis, with which she convinced Powell not to have the Fed join the OCC-led rule. That was unprecedented and was an important victory for people. ONE OF MY-PROUDEST-OF-THE FED MOMENTS was watching Lael save the the CRA.
Lael is well suited to lead the Fed’s efforts on climate change. She is not a radical tree hugger, and no one should expect (or frankly, want) the Fed to move rapidly in this direction even its regulatory work. If you want a more climate-focused Fed, talk with Congress. Ask them to pass new legislation for the Fed that makes climate an explicit responsibility for the Fed.
Lael plays the long game and is strategic in her efforts. She is not a one-and-done. When the going gets tough she digs in. As the lone Democrat on the Board during the Trump Administration, she had to put up with more external political blowback than others. Nothing is more insulting to a policy expert and public servant than to be called a political hack. And with her, nothing is further from the truth. I saw her take some of that abuse and watch it roll right off her back. She was not going to let them rattle her. We are all enjoying the fruits of her commitment to remain at the Fed.
Lael is a true leader. During my time at the Fed, I assisted of her big speeches on inequality (here and here)—a highlight of my time there. I also managed some of the economists who worked with her on CRA. She has very high standards for herself and her staff. And EVERYTHING I worked on with her had a clear purpose. Strategic thinking and a clear vision are how you get the most out of the resources you have. The Fed has to move fast because the world moves fast. No time to waste on things that don’t matter.
Lael brings expertise on the rest of the world to her work. She was born in Germany to a U.S. diplomat and grew up there and in Poland. Her Ph.D. in economics at Harvard and her tenured faculty position at M.I.T Sloan focused on international economics. (See her Google scholar page.) In the Clinton Administration, she served as an Undersecretary of International Affairs. It’s true that the Fed’s mandate is domestic; however, the economy is global as are many of our threats like pandemics and climate change, so it’s important to understand that interconnectedness. She does.
Lael is committed to a more inclusive economics profession. She is a mentor and a role model to many economists. She is for me. Once I attended a women’s lunch at the Fed where she was the featured guest. She told the group that for her it’s important to set a goal and then work hard to achieve it. What stuck with me was what she said next. She admitted that sometimes our goal isn’t attainable, so choose another one and go at it. Life changes and we must change with it. It’s been an unexpectedly rough year for me professionally. I set a new goal and kept going.
Lael’s tough as nails and does not suffer fools, though she’s always professional about it. (Not like me.) In one of the more disturbing conversations I had with a progressive woman about Lael’s bid for Treasury Secretary, I was told, “Lael was difficult to with” when she was at Treasury and has “sharp elbow.” My jaw almost hit the floor. Lael has high standards and is persistent, not a drawback. The Fed is facing its toughest year ever, and every official at the Fed needs to be ready to do the right thing regardless of the critics.
Either Lael or Jay would be an excellent appointment for Fed Chair. Personally, I would like both on the Board next year since they are a powerful team together. If not next year, someday soon Lael should be Fed Chair and/or Secretary of the Treasury. We would all benefit from it.