Stanley Fischer — Born in Africa, Served in Israel — Named to Federal Reserve

Joins Janet Yellen at U.S. Central Bank

Dual National: In 2005, Benjamin Netanyahu chose Fischer (left) to head Israel’s central bank.
Reuters
Dual National: In 2005, Benjamin Netanyahu chose Fischer (left) to head Israel’s central bank.

By Nathan Guttman

Published June 04, 2014, issue of June 06, 2014.

(page 2 of 2)

In 2005, Fischer was handpicked to head Israel’s central bank. Netanyahu, who served as finance minister in Ariel Sharon’s government at the time, and Ron Dermer, then Netanyahu’s adviser and now Israel’s ambassador to Washington, convinced Sharon that Fischer, with his international credentials, could bring to the position the worldview and experience that local Israelis lacked. Fischer agreed to leave behind his high-paying positions in the United States and immigrate to Israel. Upon taking the post, he became an Israeli citizen but did not renounce his American citizenship, as other high-ranking Israeli officials, including Dermer, were required to do.

Fischer quickly won over the Israeli public — first with his surprising command of Hebrew and later as economic skies darkened over Europe and the United States — with a policy that kept Israel safe as world economies collapsed.

Answering questions from senators during his March 13 Senate Banking Committee confirmation hearing, Fischer reflected on his experience leading Israel’s central bank through the crisis. “Israel was lucky, or whatever, that it didn’t have a financial crisis,” he said, “so when we reduced interest rates, the banks could lend more and they did, and Israel escaped the main burden of the crisis.”

In 2010, as Israelis breathed a sigh of relief over having survived the financial storm unscathed, Fischer was sworn in for a second five-year term. But he did not complete the term, and in 2013 he decided to step down and return to the United States.

While most in Israel and the world deemed his term successful, Fischer also had some harsh critics who disapproved of his financial leadership. Avi Tiomkin, venture capitalist and adviser to international hedge funds, voiced this criticism in Israeli financial publications, accusing Fischer of leaving “scorched earth” behind him and of strengthening the Israeli currency in a way that weakened its economy. “No wonder Fischer wants to go back to the United States — he understands very well the magnitude of the crisis about to come and understands that this will make him the next Alan Greenspan,” Tiomkin wrote, referring to the former Fed chair whom many blame for not anticipating the 2008 crisis.

The Fed wasn’t Fischer’s first choice after leaving his post in Israel. Fischer initially aimed for the position of managing director of the International Monetary Fund after the departure of Dominique Strauss-Kahn, but, now 70, he could not qualify, since the organization requires that its managing director be 65 or younger.

The Fed, however, was a natural second choice. Fischer was a mentor for former Fed chair Ben Bernanke and is also close to current chair Janet Yellen, who chose him for the position.

Fischer’s economic philosophy as central banker fits well with that of Yellen. He noted during his hearing in Congress the need to keep on working to reduce unemployment. “Slow growth is not an abstraction,” he said, “slow growth is people not finding jobs.”

This philosophy could be tested within months, when experts predict that debates within the Fed’s board of governors will break into public view. Some governors are calling for new moves to stimulate the economy, and others demand a focus on an exit strategy that will end the Fed’s low-interest policy and the monthly purchase of financial assets known as quantitative easing.

“Stan Fischer is walking into that kind of division,” said Blinder, who noted that in this debate, Fischer is likely to be a “reliable vote” on Yellen’s side.

Contact Nathan Guttman at guttman@forward.com or on Twitter, @nathanguttman



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