Lael Brainard’s "Crisis Management Agency" — Along with Her Cautionary Message for Trump
Joe Biden's leading economic adviser shares her challenging experiences in the White House and discusses her concerns regarding the implications of the Trump agenda.
TroibNews 
Just weeks after Lael Brainard departed from the Federal Reserve to assume the role of President Joe Biden's chief economic adviser in early 2023, she encountered a significant crisis: several large regional banks were on the brink of failure, a situation that risked destabilizing otherwise healthy financial institutions.
To address this issue, Brainard collaborated with familiar faces, including current and former Federal Reserve officials like Treasury Secretary Janet Yellen, employing a proactive strategy to reassure depositors about the safety of their funds.
In an exit interview with PMG, Brainard pointed to that banking crisis, along with various negotiations she facilitated between labor unions and corporations, as examples illustrating that the White House often acts as a “crisis management agency.”
She also delivered a specific caution to her successor regarding another impending crisis: the escalating federal debt.
“Looking ahead, there are things that you can control and things that are unanticipated,” she commented, emphasizing the debt as a controllable issue. She cautioned against the full extension of the 2017 Tax Cuts and Jobs Act, labeling it a risk to the economy.
Biden's administration has also contributed trillions to the national debt through domestic spending initiatives, although they argue that Republican tax cuts over the past quarter-century have played a larger role in the growing deficit. Republicans outright dispute that claim.
As the GOP plans for 2025, they look to extend and expand tax cuts that could diminish revenue and add approximately $5 trillion to the debt, potentially straining financial markets and jeopardizing the U.S.'s ability to borrow. Brainard expressed concern that this could reduce fiscal flexibility to address other emerging crises.
“The real question is, how much incremental risk of a big credit downgrade do you want to take on, and how much fiscal space do you want to lose, in order to get tax cuts for really high-income people?” she posed. “And those are choices that they’ll face.”
The following discussion has been edited for conciseness and clarity.
In your time at the White House, what stands out as your most stressful day or week?
The night before Silicon Valley Bank collapsed was a particularly intense moment of stress.
Some market participants were skeptical about the viability of this category of banks, which created potential for widespread economic issues.
Concerns about a major sector of the economy shutting down have surfaced multiple times. The economy was just beginning to recover from COVID, with improving supply chains, yet we are now aware how quickly a supply chain disruption can lead to shortages and price increases.
There were numerous high-stakes labor negotiations that concluded favorably, including the UAW-Big Three talks, UPS-Teamsters, APFA-American Airlines, and IAM-Boeing. Successful contracts were essential, given the sacrifices made by workers.
The East Coast ports situation was particularly noteworthy. I spent about 12 hours one night contacting global shipping company CEOs. Many of these decision-makers were based outside the U.S. and typically do not engage with White House officials. It was a dramatic night of locating the right contacts to convey the urgency of the situation and encourage action.
The debt limit negotiations also had their moments of high tension. All three crises had critical points that felt significant. Fortunately, they resolved positively, but I certainly lacked confidence going into them.
In those conversations, what role did you play? Were you seeking a mutually acceptable deal, or were you exerting pressure to expedite a resolution?
In the port negotiations, we maintained strong communication with the labor union leader to identify potential areas for agreement. However, the shipping executives were not initially engaged, leading to a standoff.
For me, it resembled negotiations during the European debt crisis at Treasury. You start with an idea of potential agreement zones and then reach out to determine each decision-maker’s boundaries. Of course, they are reluctant to disclose their limits.
It necessitates ongoing dialogue to identify overlapping areas where agreement might blossom, while also reminding them of the stakes of inaction. It’s a blend of facilitating collaboration and applying pressure — both components are essential.
With a new administration approaching, and Kevin Hassett taking over the NEC, what economic shocks are you most concerned about? Recently, the focus has been on mounting federal debt. What are your observations?
The White House acts as a crisis management agency among its various functions. I’ve learned that when the administration is running smoothly, issues typically get resolved at the agency level. However, during significant disruptions — whether financial shocks, pandemics, or natural disasters — challenging issues fall to the White House. Thus, you must be prepared to manage crises, always considering the perspective of working Americans facing economic fallout.
We strive to mitigate those shocks, ensuring working families can continue their daily activities without experiencing drastic price increases or shortages.
My advice to the incoming administration would be to prioritize the sustainability of their overall economic policies. Factors such as mass deportations, hefty tariffs, and substantial debt increases happening simultaneously could trigger inflationary pressures and erode trust in financial markets.
A proposed $5 trillion increase in debt would significantly burden market absorption capabilities. Should an event like a credit downgrade occur, it would create particularly difficult circumstances — a scenario the administration can work to avoid.
There are certainly unpredictable events— evident in the last four years—that may take them by surprise, and resilience is critical for navigating those unforeseen shocks.
I would also advise them to maintain fiscal flexibility, as it's vital during national emergencies.
Two credit rating agencies have already downgraded the U.S. How likely is it that we could experience further downgrades? Would a lack of progress in managing the debt lead to more credit rating reductions?
Extending the TCJA tax cuts in full, alongside additional business tax cuts, could result in a $5 trillion increase in debt. Given our existing debt burden and our fiscal sustainability trajectory, particularly with increasing retirements and Social Security pressures, these factors typically hurt credit ratings. Ultimately, however, these choices must be made thoughtfully. As Treasury’s recent analysis indicates, limiting extensions to 97 percent of Americans earning under $400,000 would reduce the cost to $1.8 trillion.
You also faced inflation issues, which present a different, more gradual type of crisis. Did that feel similar to crisis management?
During the pandemic's initial phase, prices actually fell, resulting in a period of disinflation due to the economy's shutdown.
In the first year following this decline, 2021 was challenging to interpret. Inflation began to rise sharply as demand shifted toward sectors with acute shortages caused by shipping disruptions and semiconductor production halts abroad.
Today, the executive branch and businesses are better prepared to tackle supply chain challenges. For instance, during the ports negotiations, retailers had begun stockpiling ahead of the contract deadlines, and shippers adjusted their contracts by adding surcharges. There is now greater anticipation for potential issues.
Additionally, thanks to enhanced data flow and collaboration across agencies such as Transportation, Commerce, and Homeland Security, managing supply chain obstacles should be more systematic during significant disruptions.
However, when the economy is entirely shut down due to events like natural disasters, the ability to quickly mobilize supply-side solutions remains limited.
With respect to crypto, it is a primary focus for the incoming Congress and administration. They may consider legislating to enhance the industry's role in traditional financial markets. How concerned are you about crypto potentially expanding within the established financial system?
I believe crypto should be treated similarly to other financial assets.
Guardrails that mirror those created through past crises are essential, particularly to avoid conflicts of interest within platforms that assume multiple roles— as brokers and issuers, for example.
The collapse of FTX showcased the necessity for such regulations, as have historical crises that prompted the establishment of these laws over time.
Implementing effective legislation is entirely achievable, and significant progress has already been made regarding stablecoins. However, more work is required to define market structure and how it relates to the crypto sector. I am optimistic that they can navigate those challenges.
Debra A Smith contributed to this report for TROIB News
To address this issue, Brainard collaborated with familiar faces, including current and former Federal Reserve officials like Treasury Secretary Janet Yellen, employing a proactive strategy to reassure depositors about the safety of their funds.
In an exit interview with PMG, Brainard pointed to that banking crisis, along with various negotiations she facilitated between labor unions and corporations, as examples illustrating that the White House often acts as a “crisis management agency.”
She also delivered a specific caution to her successor regarding another impending crisis: the escalating federal debt.
“Looking ahead, there are things that you can control and things that are unanticipated,” she commented, emphasizing the debt as a controllable issue. She cautioned against the full extension of the 2017 Tax Cuts and Jobs Act, labeling it a risk to the economy.
Biden's administration has also contributed trillions to the national debt through domestic spending initiatives, although they argue that Republican tax cuts over the past quarter-century have played a larger role in the growing deficit. Republicans outright dispute that claim.
As the GOP plans for 2025, they look to extend and expand tax cuts that could diminish revenue and add approximately $5 trillion to the debt, potentially straining financial markets and jeopardizing the U.S.'s ability to borrow. Brainard expressed concern that this could reduce fiscal flexibility to address other emerging crises.
“The real question is, how much incremental risk of a big credit downgrade do you want to take on, and how much fiscal space do you want to lose, in order to get tax cuts for really high-income people?” she posed. “And those are choices that they’ll face.”
The following discussion has been edited for conciseness and clarity.
In your time at the White House, what stands out as your most stressful day or week?
The night before Silicon Valley Bank collapsed was a particularly intense moment of stress.
Some market participants were skeptical about the viability of this category of banks, which created potential for widespread economic issues.
Concerns about a major sector of the economy shutting down have surfaced multiple times. The economy was just beginning to recover from COVID, with improving supply chains, yet we are now aware how quickly a supply chain disruption can lead to shortages and price increases.
There were numerous high-stakes labor negotiations that concluded favorably, including the UAW-Big Three talks, UPS-Teamsters, APFA-American Airlines, and IAM-Boeing. Successful contracts were essential, given the sacrifices made by workers.
The East Coast ports situation was particularly noteworthy. I spent about 12 hours one night contacting global shipping company CEOs. Many of these decision-makers were based outside the U.S. and typically do not engage with White House officials. It was a dramatic night of locating the right contacts to convey the urgency of the situation and encourage action.
The debt limit negotiations also had their moments of high tension. All three crises had critical points that felt significant. Fortunately, they resolved positively, but I certainly lacked confidence going into them.
In those conversations, what role did you play? Were you seeking a mutually acceptable deal, or were you exerting pressure to expedite a resolution?
In the port negotiations, we maintained strong communication with the labor union leader to identify potential areas for agreement. However, the shipping executives were not initially engaged, leading to a standoff.
For me, it resembled negotiations during the European debt crisis at Treasury. You start with an idea of potential agreement zones and then reach out to determine each decision-maker’s boundaries. Of course, they are reluctant to disclose their limits.
It necessitates ongoing dialogue to identify overlapping areas where agreement might blossom, while also reminding them of the stakes of inaction. It’s a blend of facilitating collaboration and applying pressure — both components are essential.
With a new administration approaching, and Kevin Hassett taking over the NEC, what economic shocks are you most concerned about? Recently, the focus has been on mounting federal debt. What are your observations?
The White House acts as a crisis management agency among its various functions. I’ve learned that when the administration is running smoothly, issues typically get resolved at the agency level. However, during significant disruptions — whether financial shocks, pandemics, or natural disasters — challenging issues fall to the White House. Thus, you must be prepared to manage crises, always considering the perspective of working Americans facing economic fallout.
We strive to mitigate those shocks, ensuring working families can continue their daily activities without experiencing drastic price increases or shortages.
My advice to the incoming administration would be to prioritize the sustainability of their overall economic policies. Factors such as mass deportations, hefty tariffs, and substantial debt increases happening simultaneously could trigger inflationary pressures and erode trust in financial markets.
A proposed $5 trillion increase in debt would significantly burden market absorption capabilities. Should an event like a credit downgrade occur, it would create particularly difficult circumstances — a scenario the administration can work to avoid.
There are certainly unpredictable events— evident in the last four years—that may take them by surprise, and resilience is critical for navigating those unforeseen shocks.
I would also advise them to maintain fiscal flexibility, as it's vital during national emergencies.
Two credit rating agencies have already downgraded the U.S. How likely is it that we could experience further downgrades? Would a lack of progress in managing the debt lead to more credit rating reductions?
Extending the TCJA tax cuts in full, alongside additional business tax cuts, could result in a $5 trillion increase in debt. Given our existing debt burden and our fiscal sustainability trajectory, particularly with increasing retirements and Social Security pressures, these factors typically hurt credit ratings. Ultimately, however, these choices must be made thoughtfully. As Treasury’s recent analysis indicates, limiting extensions to 97 percent of Americans earning under $400,000 would reduce the cost to $1.8 trillion.
You also faced inflation issues, which present a different, more gradual type of crisis. Did that feel similar to crisis management?
During the pandemic's initial phase, prices actually fell, resulting in a period of disinflation due to the economy's shutdown.
In the first year following this decline, 2021 was challenging to interpret. Inflation began to rise sharply as demand shifted toward sectors with acute shortages caused by shipping disruptions and semiconductor production halts abroad.
Today, the executive branch and businesses are better prepared to tackle supply chain challenges. For instance, during the ports negotiations, retailers had begun stockpiling ahead of the contract deadlines, and shippers adjusted their contracts by adding surcharges. There is now greater anticipation for potential issues.
Additionally, thanks to enhanced data flow and collaboration across agencies such as Transportation, Commerce, and Homeland Security, managing supply chain obstacles should be more systematic during significant disruptions.
However, when the economy is entirely shut down due to events like natural disasters, the ability to quickly mobilize supply-side solutions remains limited.
With respect to crypto, it is a primary focus for the incoming Congress and administration. They may consider legislating to enhance the industry's role in traditional financial markets. How concerned are you about crypto potentially expanding within the established financial system?
I believe crypto should be treated similarly to other financial assets.
Guardrails that mirror those created through past crises are essential, particularly to avoid conflicts of interest within platforms that assume multiple roles— as brokers and issuers, for example.
The collapse of FTX showcased the necessity for such regulations, as have historical crises that prompted the establishment of these laws over time.
Implementing effective legislation is entirely achievable, and significant progress has already been made regarding stablecoins. However, more work is required to define market structure and how it relates to the crypto sector. I am optimistic that they can navigate those challenges.
Debra A Smith contributed to this report for TROIB News
