Soothsayers have been reading the entrails. Some of them have scryed that the new treasury secretary is going to be Lael Brainard. Unless they can read Biden’s mind they cannot know for sure. Joe Biden said that he has decided who the Treasury Secretary is going to be, but he has not revealed the name. The fortune tellers have some clues. Lael Brainard is up for the job that would smash the glass ceiling, as all US treasury secretaries since Alexander Hamilton have been men. It is fairly certain that the new Treasury Secretary is going to be a woman. There are many qualified women who are in the running; including Janet Yellin.
Brainard is eminently qualified for the job. She served as the under-secretary to the Treasury for international affairs during 2010-2013. She even got the Alexander Hamilton award for her work there. This means that she is a known quantity among the central bankers and has a wealth of international expertise that is needed to repair global relationships after four years of active smashing of international crockery. Brainard is getting a top post in the next administration, if she does not get the Treasury Secretary’s job. Possibly even the Fed chair’s job when Jay Powell’s term ends in 2022.
Brainard is currently a member of the Federal Reserve’s Board of Governors and is the Administrative Governor and Chair of the Committees on Financial Stability, Federal Reserve Bank Affairs, Consumer and Community Affairs, and Payments, Clearing and Settlements.
As Central Bank Digital Currency (CBDC) is part of the payments infrastructure, Lael Brainard is in charge of the Fed’s research into CBDC. Payments related work is handled by the Boston Fed. There is an active partnership into CBDC research between the Fed Payments arm and MIT’s Digital Currency initiative, headed by Neha Nerula, another brilliant woman. Brainard’s prior work focused on poverty and financial inclusion. Her speeches reveal that she thinks that CBDC directly administered by the Fed, should be used for greater financial inclusion. Those views also link her work in Consumer and Community Affairs with the more technical work in Payments.
Brainard’s academic work focused on poverty and its alleviation. Even though she had her stint at McKinsey, she also worked on microfinance in Africa. Her last few speeches reveal her concerns: diversity and inclusion in economics, the community reinvestment act (CRA) and disparity in the post-pandemic recovery. As the head of the Fed Subcommittee on Smaller Regional and Community Banking Organizations, she is also a natural advocate for rural America.
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CBDC has several policy and legislative challenges; one of them is whether we need new laws to confirm that CBDC will be legal tender. However, the pandemic has accelerated research as well as work on CBDCs across the world. CBDC of course will co-exist with other existing rails, but will be a vehicle for increasing financial inclusion.
As an advocate for digital currencies and as a technophile, the elevation of Brainard to Treasury secretary or the Fed chair will certainly accelerate the pace of technology adoption at the Fed and the Treasury. Under her leadership, CBDC will definitely have a policy slant towards financial inclusion or even direct Fed accounts. Jon Cunliffe, Deputy Governor of the Bank Of England remarked, it is not the business of Bank of England to protect the business model of private banks when considering the effects of CBDC. Lael Brainard for one may agree with him, having witnessed underinvestment in CRA and the asymmetric effect of the pandemic response from the Fed, buying up assets and keeping banks afloat, while main street withers in the glare of the virus.