Fed’s Brainard in line for key banking post. What it means for Wall

Federal Reserve Governor Lael Brainard‘s increased influence ahead likely means substantial changes and challenges for the nation’s banking system.

Considered a progressive who favors tighter reins on financial institutions, particularly the Wall Street powerhouses, Brainard should figure prominently as President Joe Biden weighs who will chair the central bank and who will specifically supervise banks.

She is widely expected to get either of those two positions in the coming months.

“Everybody can see that the Fed has been moving toward a more progressive stance, and it wouldn’t be a big shock to see that she gets more power either as Fed chair or as vice chair for regulation,” Yardeni Research President Ed Yardeni said. “To the extent that the Fed’s always more focused on monetary policy than regulation, now one of its new mandates from the progressives is to pay more attention to regulating the banks.”

That issue came sharply into focus last week when Sen. Elizabeth Warren, D-Mass., a leading progressive and former presidential candidate, called current Chairman Jerome Powell “dangerous” because of the Fed’s move to loosen bank regulations.

Warren announced then that she would oppose Powell’s renomination. Powell’s term ends in February, though Biden is expected to make a decision well ahead of that.

Various reports have put Brainard as a top choice for Warren, though the senator has not publicly committed to a candidate. Efforts to reach Brainard for comment were unsuccessful.

“The question right now is the renomination of Fed Chair Powell. I’ve made my position clear on that,” Warren said in a CNBC interview earlier this week. “I’m not going to talk about other nominees.”

For what they’re worth, betting markets don’t expect a change at the Fed’s top rung. PredictIt gives Powell about a 73% chance of being confirmed by the Senate, with Brainard at just 18%.

Powell also has enough support in the Senate to make it through the banking committee and onto the House floor, according to a report from Bloomberg News.

Even without getting the chair’s position, Brainard can be a major influence on banks. If she is not nominated as chair, she’s a good bet to be named the vice chair for supervision, a position the current holder, Randal Quarles, is not expected to keep when his term expires this month.

“The presumption is that if Powell is renominated, not only will Brainard be the vice chair for supervision but also that she will be given a reasonable amount of free hand,” Brown Advisory head of fixed income Tom Graff said. “Obviously, Brainard would be a stronger, more stringent regulator than Quarles was.”

There are likely three areas where her influence would be most felt: Climate change, the implementation of a central…