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Tuesday, 16 September 2014

Brainard surgery

Lael Brainard isn't the only Fed no-brainer

Lael Brainard isn’t the only Federal Reserve no-brainer. As Undersecretary of the Treasury for International Affairs, she has acquitted herself nobly helping the world understand Washington’s profligate and quixotic ways. The Senate would be as daft to block her potential nomination to the Fed board of governors as it would Janet Yellen’s to the chairmanship. Filling other central banking vacancies quickly is the president’s other obvious task.

Brainard’s departure from Treasury positions her neatly for a Fed in need of new blood. The seven-member group is already short-handed by one. It will lose two more when Ben Bernanke leaves in January and Sarah Bloom Raskin becomes deputy to Treasury Secretary Jack Lew.

Having served as a representative to U.S. trading partners, financial counterparties and, perhaps most importantly, creditors since 2010, Brainard would bring much-needed expertise and perspective to the Fed. The current lineup of governors is decidedly more provincial.

Brainard’s front-line experience would serve the Fed well. She has been the first point of contact for gripes from abroad, be they Brazil’s currency war charges, Berlin’s budget lectures or Beijing’s complaints about creditworthiness.

Those accomplishments alone should secure her confirmation. Fold in the likelihood that Obama bundles Brainard with a renomination of Jerome Powell, a Republican whose term expires on Jan. 31, and it’s hard to see any serious congressional roadblocks.

That would still leave the Fed board lacking, including Yellen’s vice chairman seat. Though the chairman resolutely runs the central bank, she showed how the second in command can play a strong role, too. For one thing, she spearheaded increased transparency. Daniel Tarullo may, by seniority, be the obvious choice. With new prospects, maybe including Laura Tyson, a former economic adviser to President Bill Clinton, in the wings, it’s no guarantee, though.

Obama took too much time proposing a Fed chairman, allowing the choice for the independent agency to be kicked around distastefully in public for months. He has made an unfortunate habit of dallying to fill all manner of important roles. Given the immediate significance of monetary policy and bank oversight, moving promptly on the central bank vacancies is the real no-brainer.

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Context News

Lael Brainard, a top economic diplomat at the U.S. Treasury, will step down from her post on Nov. 8, a Treasury official told Reuters, amid reports she is under consideration for a seat on the Federal Reserve Board.

As undersecretary of the Treasury for international affairs since 2010, Brainard has played a key role in pushing China toward a flexible currency and pressing Europe to tackle its debt crisis more aggressively.

The Washington Post and the Wall Street Journal have reported that Brainard is under consideration to fill a vacancy at the Fed. The Treasury official, who spoke on Nov. 4 on condition of anonymity, did not disclose the reason for the departure and a White House spokeswoman declined to comment.

Brainard cut her policymaking teeth during the Clinton administration, working alongside many officials who later ended up serving under President Barack Obama, including top White House economic adviser Gene Sperling and Treasury Secretary Jack Lew.

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