Treasury's international policy chief on Chinese currency and U.S. financial reform
Updated 4:09 p.m.
By Howard Schneider
The United States is carefully monitoring "how far and how fast" China's currency appreciates, Lael Brainard, undersecretary of the Treasury for international affairs, told a lunchtime crowd at the Peterson Institute for International Economics.
But she deferred on the follow-up: How much does Washington think the Chinese currency should rise? What would be considered a fair pace of appreciation? There are estimates that the Chinese currency is undervalued by as much as 40 percent -- a potentially huge boost to Chinese exports.
"We have not stated a benchmark" for the currency's revaluation, Brainard said. (For the record, the renminbi has risen less than 1 percent since China announced a month ago that it was reapplying a "flexible" exchange rate, presumably allowing its currency to drift higher on the open market as a way to curb its large trade surplus and aid in the rebalancing of world trade flows. Members of Congress have promised a legislative response.)
It was much the same on the other issues Brainard addressed -- a restatement of administration policy without much insight into what is likely to happen next.
This was one of her first public appearances since her Senate confirmation to the international post, and she fielded a full hour of questions from an audience of economists, ambassadors and journalists.
She was pressed a lot on trade -- about the administration's plans for boosting exports to China or moving ahead with stalled free trade agreements.
"The question of how to move forward is an important one was we seek to boost exports," she said in response to a question about the Korea-U.S. free trade negotiations, while increasing purchases from U.S. companies is "squarely on the table" in negotiations with the Chinese.
But some of her most intriguing comments were on the still unfinished business of financial reform. In particular, Brainard was asked for more detail about the functioning of the Financial Stability Oversight Committee, established under the recently approved financial legislation.
A lot of stock is being put in such new panels to root out "systemic risk," ensure strict oversight of large, connected institutions, and take action to prevent another global collapse. But the precise powers and methods of the oversight committee are still to be determined. A new Treasury-based office of research will be feeding it information --
theories about systemic threats to the economy are not fully formed -- and at a minimum, Brainard said, the panel will ensure that the country's top regulators will have a place to sit face to face and discuss the emergence of broader threats.
Membership in the panel includes Treasury, the Fed, and key regulatory agencies. "I can't speak to all the specifics," Brainard said, but "it's got all the right people at the table."
As The Post's Howard Schneider reported earlier, Brainard's prepared remarks were pretty routine, overall: We did great managing the crisis, she said. The new financial regulations will make the system stronger. ... More good things to come through the Basel Committee on bank capital and liquidity requirements.
By Howard Schneider | July 26, 2010; 4:09 PM ET