Senior U.S. Treasury official to step down, seen as Fed candidate

Reuters

By Jason Lange

WASHINGTON, Nov 4 (Reuters) - Lael Brainard, a top economicdiplomat at the U.S. Treasury, will step down from her post onFriday, a Treasury official said, amid reports she is underconsideration for a seat on the Federal Reserve Board.

As undersecretary of the Treasury for international affairssince 2010, Brainard has played a key role in pushing Chinatoward a flexible currency and pressing Europe to tackle itsdebt crisis more aggressively.

The Washington Post and the Wall Street Journal havereported that Brainard is under consideration to fill a vacancyat the Fed. The Treasury official, who spoke on Monday oncondition of anonymity, did not disclose the reason for thedeparture and a White House spokeswoman declined to comment.

Brainard cut her policymaking teeth during the Clintonadministration, working alongside many officials who later endedup serving under President Barack Obama, including top WhiteHouse economic adviser Gene Sperling and Treasury Secretary JackLew.

Brainard, who has a doctorate in economics from HarvardUniversity, served as deputy director of Clinton's NationalEconomic Council, where she focused on international trade andfinancial policy. She was also the U.S. representative to themeetings of the Group of Eight industrialized nations.

The Senate took more than a year to confirm Brainard for hercurrent post, slowed by a committee probe into her personaltaxes.

In recent months, she has been seen as a steady hand oninternational economics for Lew, who became the top Treasuryofficial in February and who had focused mainly on budget issuesduring his long career in government.

Obama is likely to need to fill several seats on the Fed'sseven-person board in the coming months. Fed Governor ElizabethDuke stepped down in August; Fed Chairman Ben Bernanke isexpected to give up his board seat when his term as chairmanexpires at the end of January; and Obama has nominated FedGovernor Sarah Raskin for a top Treasury post.

In addition, Fed Governor Jerome Powell's term expires inJanuary, although Obama is expected to renominate him.

INTERNATIONAL EXPERIENCE

If nominated to the Fed, Brainard, 51, would bring afamiliarity with top economic officials around the globe.

She accompanied Lew on his first two foreign trips, toBeijing and to Europe, and represented him at severalinternational gatherings, including the Group of 20 meetings inSt. Petersburg in September.

Before joining the Obama administration, Brainard worked asa senior fellow at the Brookings Institution, where she helpedfound the think-tank's global economy and development program.

In her academic work, she has focused on financial policyand trade issues, and she advised the Obama campaign on tradepolicy in 2008. While at Brookings, she also wrote aboutdevelopment, foreign aid and climate change.

She is not an expert on monetary policy, though she haspublished articles about financial regulation and labor markets.

Eswar Prasad, a trade and international economy professorwhom Brainard hired at Brookings, said her internationalcredibility and focus on labor markets and distributional issueswould bring a new perspective to the Fed.

"It would go beyond the traditional focus on issues such asgrowth, stability and unemployment, to thinking more aboutdistributional issues, (and) about what happens to differentsectors and industries as a consequence of monetary policy,"Prasad said.

He also said Brainard's international experience could helpthe Fed to more clearly communicate its policy message to aglobal audience.

Brainard has written several articles about the effects ofglobalization and offshore production on domestic employment.

She has also looked at the debate over structural versuscyclical unemployment - an issue front-and-center in current Fedpolicy discussions as officials try to gauge how many people whohave dropped out of the labor force are likely to return.

In testimony to Congress in 2007, she argued that the UnitedStates should pass permanent wage insurance to lessen the impactof globalization on American workers.

She was previously a professor of applied economics at MIT'sSloan School of Management, teaching graduate business courseson international trade and financial policy. She also worked atthe consulting firm McKinsey and on microfinance in West Africa.

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