Stanley Fischer has worked for much of his professional life to
improve economic policy in the developing world. Now he is on the verge
of a new role in a country with plenty of economic problems of its own:
the United States
Stanley Fischer, Fed Nominee, Has Long History of Policy Leadership
WASHINGTON
— Stanley Fischer has worked for much of his professional life to
improve economic policy in the developing world. Now he is on the verge
of a new role in a country with plenty of economic problems of its own:
the United States.
Mr.
Fischer, nominated by President Obama to serve as vice chairman of the
Federal Reserve, is likely to move quickly through a confirmation
process that begins with a hearing before the Senate Banking Committee
on Thursday morning.
Assuming
Mr. Fischer successfully negotiates that gantlet, he would join Janet
L. Yellen, the Fed’s new chairwoman, in the difficult work of figuring
out how much more the Fed can do to help the economy recover from the
Great Recession. Ms. Yellen proposed his selection to the White House.
Mr.
Fischer has supported the efforts by the Fed and other central banks to
revive economic growth, but he has also described the benefits as
limited. “You could do a lot with monetary policy, but you couldn’t get
the economy growing fast again,” he said on Bloomberg Television in
September. “You needed fiscal policy.”
Genial, courtly, self-effacing, Mr. Fischer is skilled at making sharp points without making enemies.
Lawrence
H. Summers, a former Treasury secretary, suggested at a November
conference held by the International Monetary Fund in Mr. Fischer’s
honor that there were fewer financial crises in the decades after World
War II because people acted prudently.
“Larry,”
Mr. Fischer responded, “I wonder whether the 35 years after World War
II had something to do with the fact that financial liberalization
hadn’t yet happened.”
Mr.
Fischer, now 70, is a widely respected figure in the world of economic
policy. His academic work in the 1970s helped to provide the
intellectual justification for today’s activist monetary policy. His
students included the recently retired Fed chairman, Ben S. Bernanke,
and Mario Draghi, head of the European Central Bank.
He
subsequently began a career in policy-making, including a stint as
second-in-command at the International Monetary Fund during the 1990s
and, most recently, an eight-year run as governor of the Bank of Israel,
a job he left in June.
Along
the way, Mr. Fischer, born into a family of shopkeepers in a small town
in present-day Zambia, in a home without running water, amassed a
fortune as the author of a best-selling economics textbook and a senior
executive at Citigroup.
Mr.
Fischer in December disclosed assets worth $14.6 million to $56.3
million, including a residence in New York worth at least $5 million. He
said that he would divest some stock and investment holdings if he were
confirmed.
Mr.
Fischer has said that his upbringing in Mazabuka, then part of the
British colony of Northern Rhodesia, imbued him with a passion for
economic development.
“One
of the things that got me interested in economics, peculiarly, was that
Dag Hammarskjöld was an economist,” Mr. Fischer recalled in
a 2004 interview with his friend Olivier Blanchard,
now the chief economist at the I.M.F. “When I was in high school, Dag
Hammarskjöld was this great man. Then he was killed in the then-Belgian
Congo, right next door. I knew he had done good in the world and my
parents had brought me up to believe I should do good in the world. I
realized that economics would help you do good.”
Mr.
Fischer came to America in the late 1960s for a doctorate at the
Massachusetts Institute of Technology, then spent nearly two decades
there as a professor of economics. His most famous work was
a 1977 paper that helped to ignite a revival of the idea that central banks can stimulate economic activity. He became an American citizen in 1976.
He
turned to policy-making in the late 1980s — a change Mr. Bernanke and
others would describe as an inspiration in their own careers — by
joining the World Bank as chief economist. Then, after a brief return to
academia, the Clinton administration secured his appointment as the
I.M.F.'s first deputy managing director.
Developing
nations were hit by a series of financial crises during Mr. Fischer’s
time at the fund, and the changes in economic policy that the I.M.F.
required from countries seeking its help remain controversial. The
fund’s typical demands included reductions in domestic spending and
greater openness to foreign investment. Critics argue that many of the
changes did more harm than good.
“Tens
of millions of people were unnecessarily thrown into poverty,” said
Mark Weisbrot, co-director of the liberal Center for Economic and Policy
Research. He said the United States suffered, too, as those countries
devalued currencies and pumped out cheap exports, driving trade deficits
to record heights.
“Did
he ever admit that they were wrong in the Asian crisis?” Mr. Weisbrot
asked of Mr. Fischer. “If he’s never admitted that, then I wouldn’t
trust him.”
Mr.
Fischer’s tenure as a Citigroup executive between 2002 and 2005 also
has drawn scrutiny from Democratic senators who favor stronger limits on
big banks.
“I’d never been in a private sector and it interested me,” Mr. Fischer said in 2004.
He
led the bank’s public sector advisory group and served as president of
Citigroup International, overseeing the bank’s foreign operations,
working under a contract that allowed him to leave for a “high-level”
government job without surrendering the value of his stock options. When
Israel called in late 2004, he left.
Senator
Sherrod Brown, an Ohio Democrat, has said that he plans to ask Mr.
Fischer what he learned on Wall Street and how it would influence his
work at the Fed.
Mr.
Fischer became an Israeli citizen in 2005 while retaining his American
citizenship, but he already had deep ties to the country, and he
insisted on speaking Hebrew there from the outset. His arrival was
compared by one local paper to the acquisition of the Brazilian soccer
great Ronaldinho by an Israeli team.
Although
the Israeli economy swooned during the global financial crisis, it
never fell into recession. Mr. Fischer cut interest rates quickly at the
crisis’s beginning and, breaking with the I.M.F. playbook he had helped
to write, he built up foreign reserves to limit the rise of the shekel.
Shlomo
Maital, a professor at the Technion Institute of Management, credited
Mr. Fischer with “navigating Israel through the global financial crisis
that began in 2008, more or less unscathed, by clever manipulation of
interest rates and impeccable timing.”
Mr.
Fischer also worked quietly to preserve the Palestinian banking system
and, when he stepped down last year, both Israeli and Palestinian
officials mourned his departure.
While
Mr. Fischer has avoided public speaking in recent months, there have
been glimpses of his views. The former secretary of the Treasury Robert
Rubin said last week that he had made a $1 bet with Mr. Fischer about
the economy’s performance in 2014. Mr. Rubin said he was the pessimist,
while Mr. Fischer was more optimistic.
“I think he’s good for the money,” Mr. Rubin joked. “I know I am.”
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Stanley Fischer, Fed Nominee, Has Long History of Policy Leadership - NYTimes.com
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