In the summer of 2008, Lael Brainard, then a vice-president at the Brookings Institution think-tank, warned that US leadership on the international economic stage was in danger of faltering.
It was close to the height of the financial crisis and there was growing scepticism of the “liberalisation agenda”, driven by Washington for decades, which had pushed for open trade and markets: Ms Brainard argued that a change of course was necessary and possible.
“There is good reason to believe that US leadership can be successful if we are thoughtful and adaptive, willing to change our ways of doing things, and open to true co-operation with other nations,” she wrote in a paper co-authored with David Lipton, who would later serve in a senior IMF job.
Twelve years later, Ms Brainard may have to apply those lessons again as America’s top economic official in the post-Trumpian era.
Ms Brainard, now a 58-year-old Federal Reserve governor, is seen by many as the leading contender to be Treasury secretary in Joe Biden’s incoming administration. Other potential candidates include Janet Yellen, the former Fed chair, Sarah Bloom Raskin, the former deputy treasury secretary, and Roger Ferguson, chief executive of asset manager TIAA.
If she is chosen, Ms Brainard would break one of the most rigid glass ceilings in US government: no woman has yet served as treasury secretary since the department was first run by Alexander Hamilton in 1789.
Her first mission would almost certainly be on the domestic front: ensuring that Mr Biden’s ambitious economic agenda, including large-scale stimulus to jolt the recovery, can be passed in a divided Congress and properly implemented.
But Ms Brainard is also steeped in international expertise and relationships, which makes her a known quantity in finance ministries and central banks around the world.
Between 2010 and 2013, she was the Treasury department’s top official on international affairs, which was a stepping stone to the secretary job for both Tim Geithner and Larry Summers. This could mean greater co-ordination and engagement from Washington in a global response to the pandemic’s fallout following the Trump administration’s deep scepticism of multilateral solutions.
“She knows the international side of the Treasury; she knows all the players internationally, be it on the regulatory side, the monetary policy side and the diplomatic side,” said Mark Sobel, a former US treasury official and chairman of Omfif, a central bank think-tank.
“It’s very hard to imagine anybody who can check all those boxes, and be so ready to hit the ground running,” he added.
Ms Brainard was born in Hamburg during the years when her father Alfred was stationed in Europe, including stints in both Germany and Poland, as an American diplomat.
“I grew up living mostly behind and along the Iron Curtain. Many children, I think, are told to mind their manners. In my house, it was always followed by the admonition, ‘Don’t forget, you’re representing America’,” she told the Senate finance committee in late 2009.
Her higher education was in the US, with a bachelors degree at Wesleyan University and a PhD in economics from Harvard University. After launching her career at McKinsey, Ms Brainard moved to the Clinton administration’s economic team, working on trade, development and serving as US sherpa to the 2000 G8 summit.
When Barack Obama won election eight years later, Ms Brainard was primed to return to a top economic job, and clinched Treasury’s international portfolio at a time when one of the top priorities was pushing Europe to tame its sovereign debt crisis, including making Germany boost its spending.
“At that point, the global economy was recovering, and there was a narrative that what was needed was austerity, and getting debt levels down as quickly as possible and budget deficits down,” said Nathan Sheets, the chief economist at PGIM Fixed Income and a former Treasury official under Mr Obama. “And the Treasury was leaning against that as risk to demand.”
Her other big challenge was handling the very delicate economic relationship with China, trying to get Beijing to allow its currency to appreciate and shrink its current account surplus.
Under her watch, the US repeatedly declined to label China a “currency manipulator”, which could have led to more punitive measures against Beijing. Those decisions embodied the policy of engagement rather than confrontation that was harshly criticised by the growing ranks of China hawks of all political stripes in Washington.
During those years at Treasury, Ms Brainard earned a reputation for being intellectually formidable, extremely persistent in pushing ideas and a tough negotiator who wouldn’t take “no” for an answer. “She’s a do-er as well as a thinker,” Mr Sheets said.
But after Hillary Clinton’s defeat to Mr Trump in 2016, the Obama administration’s international economic policy faced strong criticism from the leftwing of the Democratic party. They claimed it had been too market-friendly, excessively confident in the benefits of globalisation and insufficiently focused on the impact on working-class Americans.
Since joining the Fed in 2014, Ms Brainard has gained more favour with the increasingly influential progressive flank of the Democratic party, which could make her a more palatable nominee.
She has embraced more dovish monetary policy, tougher financial regulation and higher capital standards for banks that challenged the Fed’s looser policies in a series of dissents. This might point to her reinvigorating the Financial Stability Oversight Council, a regulatory panel created under the Dodd-Frank law, particularly to oversee risks to the system stemming from non-bank institutions.
Ms Brainard has also led the push at the US central bank to overhaul the law that governs bank lending in distressed and minorities communities to make it more effective, while also pushing the Fed to recognise climate change as a risk to financial stability.
One reason Ms Brainard might not be tapped to be Treasury secretary is if Mr Biden would rather see her as Jay Powell’s replacement in the Fed chair role when his term expires in 2022. But regardless of where she lands, Ms Brainard is primed to be one of the most influential economic policymakers of the budding Biden era.
“She is not going to push for the same types of policies that we might see if somebody like Elizabeth Warren was instead appointed to be Treasury secretary,” said Kathryn Judge, a professor at Columbia University with expertise in financial regulation.
“But a lot of people also evolve and grow in their thinking over time . . . there’s some indication, given her recent votes, but also the ways that she’s exercised her voice, to suggest that she would prioritise at least aspects of the progressive agenda.”