By JIM KUHNHENN and MARTIN CRUTSINGER
2014-01-11 03:01 AM
WASHINGTON (AP) -- President Barack Obama intends to nominate Stanley Fischer, a former head of the Bank of Israel, to be vice chairman of the Federal Reserve, replacing Janet Yellen, who is ascending to the central bank's chairmanship.
Fischer, a dual citizen of the United States and Israel, is considered a leading expert on monetary policy. He was a long-time professor at the Massachusetts Institute of Technology. Departing Fed Chairman Ben Bernanke was one of his students.
Obama also is nominating Lael Brainard as a Fed governor. Brainard served as the undersecretary for international affairs at Treasury during Obama's first term. She left the administration recently. He also is renominating Jerome Powell to the Fed for a second term.
"These three distinguished individuals have the proven experience, judgment and deep knowledge of the financial system to serve at the Federal Reserve during this important time for our economy," Obama said in a statement.
In selecting Fischer, Obama is tapping someone with extensive experience in global economics to serve on the Fed's seven-member board. Fischer served as chief economist at the World Bank and deputy managing director of the International Monetary Fund. He led the Bank of Israel from 2005 until 2013.
During his time as the No. 2 official at the IMF from 1994 to 2001, Fischer dealt with a number of countries in financial crises. The 1997-98 Asian currency crisis forced a number of nations to seek support packages from the IMF to stabilize their currencies and emerge from deep recessions.
"He is widely acknowledged as one of the world's leading and most experienced economic policy minds, and I'm grateful he has agreed to take on this new role, and I am confident that he and Janet Yellen will make a great team," Obama said.
Obama praised Brainard as "one of my top and most trusted international economic advisers during a challenging time not just at home, but for our global economy as well."
Economists said they did not expect Fischer, 70, to dissent from the activist approach to Fed policy that Bernanke and Yellen have supported. That effort has kept interest rates low in an effort to stimulate growth and fight high unemployment in the wake of the 2007-09 recession.
Critics of this approach have worried that the central bank's low interest rate policies, including massive purchases of Treasury bonds and mortgage-backed securities, could be setting the stage for future economic problems. The concern is that the prolonged period of low interest rates could trigger unwanted inflation down the road and also threatens to build up bubbles in assets such as stock which could destabilize financial markets.
David Jones, chief economist at DMJ Advisors and the author of several books on the Fed, said that Fischer had an excellent reputation in the field of monetary policy and would bring expertise in global economics.
"The White House has reached out to someone who has a wealth of not only theoretical experience but practical experience in monetary policy," Jones said.
In addition to serving as Bernanke's faculty adviser when he was writing his doctoral thesis at MIT, Fischer also taught Mario Draghi, the current head of the European Central Bank. He also wrote or co-authored a number of influential college economics textbooks.
Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University, said that Fischer's selection to be a top official at the U.S. central bank after he had headed Israel's central bank followed a pattern set recently by Britain. That country tapped Mark Carney, who had been head of the Bank of Canada, to take over this year as the new head of the Bank of England.
"I think we are going to see more and more such moves," Sohn said. "Because of globalization, the world economy is now very interconnected."
During his time as head of Israel's central bank, Fischer earned praise for his handling of Israel's economy in the aftermath of the 2008 financial crisis.
After leaving the IMF in 2001, Fischer worked from February 2002 to April 2005 at U.S. banking giant Citigroup, holding various positions including president of Citigroup International.
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