Fed brainards are ready for major bank positions. Meaning for Wall Street

Texas News Today

Federal Reserve Board of Governors, Lyle Brainard, speaks at the annual meeting of the National Association for Business Economics (NABE) on Monday, September 27, 2021 in Arlington, Virginia.

Aldrago | Bloomberg | Getty Images

A future increase in the influence of the Federal Reserve Board of Governors, Lyle Brainard, could bring significant changes and challenges to the nation’s banking system.

Brainard is seen as a progressive figure who prefers tighter control over financial institutions, particularly Wall Street powers, and President Joe Biden presides over the central bank and believes who will oversee the bank in particular. . Therefore it should be seriously considered.

She is expected to take up one of these two positions in the next few months.

“Everyone knows the Fed is moving towards a more progressive stance and sees him/her getting stronger as either the Fed chair or regulatory vice president,” said Jardeny research governor Ed Jardney. There won’t be any major setbacks. “.. “While the Fed has always focused monetary policy over regulation, one of the progressives’ new missions is to focus more on bank regulation.”

The issue came to the fore with progressive and former presidential candidate Elizabeth Warren, who called current president Jerome Powell “dangerous” as the Federal Reserve Board tried to ease banking rules last week. Rice field.

Warren later announced that he would oppose Powell’s recommendation. Powell’s term ends in February, but Biden is expected to make a decision earlier.

Senators have not publicly committed to the candidate, but various reports have listed Brainard as Warren’s leading candidate. Efforts to seek comment from Brainard were unsuccessful.

“The issue now is the appointment of Fed Chairman Powell. I’ve made my position clear on this,” Warren said in an interview with CNBC earlier this week. “I’m not going to talk about the other candidates.”

The betting market doesn’t expect the Fed’s top-notch changes to get what they’re worth. PredictIt gives Powell about a 73% chance of being confirmed by the Senate, and Brainard only 18%.

According to a Bloomberg News report, Powell has enough support to pass the banking board and reach the House floor in the Senate.

Even without a chairman, Brainard could have a significant impact on banks. If he is not appointed chairman, then it is good for him to be appointed vice-chairman for oversight. The current owner, Randall Qualls, is not expected to retain his position at the end of this month’s period.

“If Powell is nominated, Brainard will not only be vice president of directors, but he will also be given a nominal amount,” said Tom Graff, head of fixed income at Brown Advisory. I have. “Obviously, Brainerd will have a stronger and more stringent regulator than Quarles.”

three notable issues

Its impact is most felt in three areas: climate change, the introduction of central bank digital currencies, and banks to raise money during times of prosperity. The latter issue is called the countercyclical capital buffer in the banking industry, which Brainard supports and Quarles disagrees.

The third issue brings banks back to the pre-high-risk financial era, but the first two are untapped waters. The Federal Reserve Board will soon publish a Federal Reserve Board-backed study on the feasibility of a digital dollar, of which Brainard is a strong supporter, although some other officials are more skeptical. This is a schedule.

Climate change is an area of ​​particular interest to Brainard.

On Thursday, he gave a speech discussing “climate landscape analysis”. It is essentially a move for financial institutions to start planning for the economic risks they may face from climate-related issues. But they also discussed the potential to bank stress tests on climate risk.

In his speech, he said such plans should include “frequent, comparable and ultimately mandatory disclosure” of climate, and that banks were threatened at some point. It shows that you are forced to explain.

“Together these efforts help ensure that the financial system is resilient to climate-related risks and is well positioned to transition to a sustainable economy,” she said.

What does this mean for banks

Investors are already dissatisfied with bank stocks this year as low credit demand and extremely low interest rates hinder operating profits.

Industry watchdog experts don’t usually expect him to be recognized as a major threat, but having Brainard as the Fed’s direct regulator could deal an even greater blow to the sector. However, debate rages on when Biden names Saul Omarova, who is known to be hard on the banks, as head of the Office of the Comptroller of the Currency.

“For Brainard” [vice chair for supervision]..he actually did it before. “It’s safe,” said Christopher Holden, president of Holden Global Advisors.

Brainard’s career includes a three-year stint as the Deputy Secretary of State for International Affairs at the Treasury during the Obama administration. She has held several roles at the Fed, including chairing a subcommittee on financial stability and payments, clearing and settlement.

In monetary policy, he is one of the leading Dosh voices, meaning he has favored lower interest rates. Fed watchers gave Brainard’s speech a credible agent of where Yellen stood in monetary policy, as he was perceived to have an ideological kinship to former Chairman Janet Yellen (now Treasury Secretary). I accepted it.

The Federal Reserve Board of Governors has resigned following revelations that two regional presidents, Boston’s Eric Rosengren and Dallas’ Robert Kaplan, are transacting extensively in their personal investment portfolios. We are in a time of moral upheaval. Federal Open Market Committee vice chairman Richard Clarida has also been cited in news reports that he closed the deal the night before Powell’s speech in February 2020.

Like other Fed officials, Brainard remains silent on the issue because the central bank remains handicapped where it goes.

“Powell was the least reluctant road to the White House,” said the Brown advisory graph. “If this story continues to feature prominently and oxygenate Warren’s argument that Warren doesn’t look after his people or banks, it could change politics. [Biden’s] Decision. “

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