BUSINESS

STANLEY FISCHER IS SEEN AS LEADING CANDIDATE FOR FED VICE CHAIRMAN

Staff Writer
Columbus CEO

c.2013 New York Times News Service

WASHINGTON — Stanley Fischer, the former governor of the Bank of Israel and a mentor to the Federal Reserve’s chairman, Ben S. Bernanke, is the leading candidate to become vice chairman of the Fed, according to former and current administration officials.

If nominated, and then confirmed by the Senate, Fischer, 70, would succeed Janet L. Yellen, whom President Barack Obama nominated to succeed Bernanke as the Fed’s leader when his term ends in January.

Fischer has recently raised questions about the Fed’s efforts to stimulate the economy. He offered cautious support at a conference last month for the Fed’s bond-buying campaign, describing it as “dangerous” but “necessary.” But he has expressed greater skepticism about the companion effort to hold down borrowing costs by declaring that short-term interest rates will remain low, describing such forward guidance as potentially confusing.

“You can’t expect the Fed to spell out what it’s going to do. Why? Because it doesn’t know,” Fischer said at a conference in September, according to The Wall Street Journal. “It’s a mistake to try and get too precise.”

Fischer stepped down in June after eight years as the leader of Israel’s central bank. He drew wide praise there for helping to shelter the Israeli economy from the global financial crisis, in part by moving quickly to cut interest rates.

In monetary policy circles, Fischer is better known as a teacher. During his time as a professor at Massachusetts Institute of Technology, beginning in the late 1970s, he taught a considerable number of students who later became leading economic policymakers, including Bernanke and Mario Draghi, the president of the European Central Bank.

His former students say that Fischer inculcated the view that government, in moderation, could improve economic outcomes — a view at odds with the wisdom of the time, which saw government largely as an impediment.

Fischer left academia in the late 1980s for jobs in public service, first at the World Bank and then at the International Monetary Fund. In 2002, he took a job as a vice chairman at Citigroup, remaining until 2005, when he accepted Israeli citizenship — while retaining his U.S. citizenship — and began a five-year term as chairman of the Bank of Israel. News about Fischer’s possible nomination was first reported on Israeli television.

Bernanke cited Fischer as one of his most important mentors last month, saying that he “demonstrated that he lived what he taught.”

The administration’s interest in Fischer appears to reflect a desire for continuity at the central bank. The White House had the unusual opportunity to replace as many as five of the seven members of the Fed’s board of governors. Instead it has chosen to replace just three of the governors, and to select replacements similar to those who are departing.

The White House did not comment on Fischer’s possible nomination.

Yellen, the current vice chairwoman, is awaiting Senate confirmation, and it now appears that her replacement will be Bernanke’s mentor. That would preserve a version of the current intellectual relationship between the Fed’s top officials, with Fischer cast in Bernanke’s slightly more conservative role.

The White House still needs to fill two more vacancies. Lael Brainard, formerly the Treasury undersecretary for international affairs, is a front-runner for one of the positions, according to people familiar with the matter.