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Federal Reserve Governor Lael Brainard: The Fed's Uncomfortable Crown Princess


The Hamburg-born Fed governor Lael Brainard has stood out as a critic of deregulation. That promotes her career in the US Federal Reserve - maybe all the way to the top. America's big banks are facing harder times.

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Energetic "deviator" of the Federal Reserve:

Fed governor

Lael Brainard


makes her steadfast

now the hot contender for two top jobs in the US Federal Reserve


This woman has an unusual reputation in the world of central banks: A columnist for the "New York Times"



Lael Brainard

(59) as "The Great Dissenter" of the US Federal Reserve (Fed). Deviant ".

So far, such an attribution has been seen as a career obstacle for central bankers.

After all, values ​​such as continuity, restraint and moderation are particularly important in the uppermost sphere of the US financial world.

But the Hamburg-born US economist Brainard now has the best chances of taking an important career step within the US Federal Reserve, possibly even at the top.

The diplomatic daughter and Harvard graduate has been the governor of the central bank since 2014, and she is also a member of the seven-member Fed board of directors, the central bank's supervisory board. The married mother of three is currently the only Democrat on the body. Before joining the Fed, after starting her career as a McKinsey advisor, she worked as an economic advisor to the Clinton administration, worked at the renowned think tank Brookings Institution and, from 2009 to 2013, was Secretary of the US Treasury.

During the tenure of

Donald Trump

(75), she was the only Fed governor who regularly opposed the Wall Street deregulation promoted by his administration.

In several decisions, reports the New York Times, Brainard clearly voted against the deregulation agenda of the rest of the board of directors - such as liquidity requirements, trading rules and capital reserves.

She has always "vigorously represented" her decisions, which makes her the heroine of all those who advocate stronger regulation of the banking sector.

Brainard also has a good chance of succeeding Fed Chairman Powell

With this attitude, Brainard rose to be the opponent of Fed Chairman

Jerome Powell

(68) - and also the antagonist of

Randal Quarles

(64), the "Vice Chair of the Federal Reserve for supervision" and thus the top overseer of the US Federal Reserve. Quarles' term expires this week, so the US government will soon announce his successor. It is quite possible that US President Joe Biden (78) will now appoint Brainard to head the Fed's supervisory body - or that she has been earmarked for even higher ordinations.

Because Powell's term of office will also end in the foreseeable future, namely at the beginning of next year.

For a long time it seemed that Biden Powell would order for four more years.

In the past few weeks, however, numerous prominent democrats have spoken out openly against the previous central bank chief.

It is therefore highly conceivable that Biden will replace Powell, who has been in office since 2018, as Fed chief.

Brainard is considered by many US observers as the Crown Princess.

Especially since her most recent public speaking shows how much she's preoccupied with a topic that fits well with Joe Biden's next big challenge: mitigating climate change.

She wants to force big banks to protect the climate through regulation

In the middle of last week, Brainard indicated in a virtual conference that the US Federal Reserve intends to seriously test the financial risk big banks are exposed to as a result of climate change. "In the end, I expect that it will be helpful to provide guidelines for large financial investments," said Brainard, according to a public manuscript. These are intended to support the big banks in their efforts to "measure, monitor and manage" "substantial climate-related risks" in an appropriate manner.

Translated, this means: According to Brainard, the Fed should intensify its efforts to measure the risks for banks caused by climate change.

There is still a lot of work to be done by the regulators, said Brainard, as there are data gaps to be filled and new models to be built.

After Trump's deregulation, the Fed apparently wants to put banks on the curb again.

One of the two top jobs in the US Federal Reserve will get Brainard, says the US business broadcaster CNBC.

The Fed has recently moved in the direction of more progressive positions, says a market observer.

It would therefore be "not a big shock" if Brainard were to get more power as Fed chief or top Fed regulator.

For the US financial industry, Brainard's influence will probably be felt in three areas, according to CNBC: With climate change, with the creation of a digital currency backed by a central bank - and with getting banks to save more capital in good times.

That also means: The all too carefree times are coming to an end for the major US banks.

"Wall Street banks should prepare for a more aggressive surveillance and control environment," said former Fed legal advisor Jeremy Kress to the Bloomberg news agency.

"Banks have received a leap of faith in the past four years. That is probably over now."


Source: spiegel

All news articles on 2021-10-13

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