Departure of monetary policy hawk adds to leadership turbulence at US central bank
yesterday by: Sam Fleming in Washington
Stanley Fischer has submitted his resignation as vice-chairman of the Federal Reserve, adding to the turbulence at the US central bank as it faces a host of vacancies at its most senior levels.
In a letter to President Donald Trump, the former Bank of Israel chief said he would leave around October 13 for “personal reasons”, which he did not amplify. The 73-year-old Mr Fischer’s term as vice-chair, which began in May 2014, was not due to expire until June next year.
Mr Fischer’s departure comes amid a highly uncertain period for the Fed’s board of governors, leaving up to four of its seven seats vacant. It brings forward another opportunity for Mr Trump to recast the policy and direction of the central bank — as well as deepening the uncertainty within financial markets about its likely policy stance.
Mr Fischer has been a visceral opponent of Mr Trump’s efforts to deregulate the financial sector, giving the president an opportunity to put a Wall Street-friendly policymaker in the post. Mr Fischer was also seen as more hawkish than Janet Yellen, the Fed chair, and Mr Trump has publicly voiced support for keeping interest rates low for an extended period.
“He represented the board internationally with distinction and led our efforts to foster financial stability, » Ms Yellen said. « I’m personally grateful for his friendship and his service. We will miss his wise counsel, good humour, and dry wit. »
Ms Yellen’s term as chair is up in February, and Mr Trump has made it clear he may not reappoint her; the possible candidates to replace her include Gary Cohn, the director of Mr Trump’s National Economic Council.
Lloyd Blankfein, chairman and chief executive of Goldman Sachs, where Mr Cohn worked until last year, said on Wednesday: “I don’t know that he reads a lot of policy papers let alone write them… [but] there’s nobody who has a better sense of markets or the consequences that decisions will have that are guided by market forces.”
In addition, Mr Trump has appointed Randal Quarles, a proponent of bank deregulation, to be the new vice-chair of financial supervision at the Fed — a nomination that needs to be confirmed by the Senate. The president has also been considering Marvin Goodfriend, a Carnegie Mellon University economist, for the board of governors, and a further board seat for a person with community banking experience also needs to be filled.
Mr Fischer was widely respected in central banking circles, having spent his entire career in global financial institutions, including the World Bank and International Monetary Fund, and academia’s leading economic departments, including the University of Chicago.
Mohamed El-Erian, chief economic adviser at Allianz, who worked under Mr Fischer at the IMF in the 1990s, said his departure was a loss not just for the Fed, but for the global central banking world.
“He brings to the table this very rare and unique combination of a very solid economics foundation, massive national and international experience . . . his widely admired judgment, and on top of that exceptional inter-personal skills,” Mr El-Erian said. “He will be missed in a big way.”
Mr Fischer was not expected to be reappointed as vice-chair when his term expired, although he would have had the option of staying on as a governor until 2020. He was known to have differed with Ms Yellen on occasions — in particular in September 2015, when he struck a publicly hawkish note on rates at a time when the Fed chair was planning to keep policy on hold.
In a recent interview with the Financial Times, Mr Fischer was also highly critical of Republican efforts to loosen the post-crisis regulatory regime, in forthright comments that broke with the veiled language normally used by central bankers. “After 10 years everybody wants to go back to a status quo before the great financial crisis. And I find that really extremely dangerous and extremely short-sighted,” he said at that time.
Born in the former UK protectorate of Northern Rhodesia, Mr Fischer holds dual US-Israeli nationality and served as the governor of the Bank of Israel from 2005 to 2013. He also worked as the first deputy managing director at the International Monetary Fund, the chief economist at the World Bank, and vice-chairman of Citigroup.
His academic work in the 1970s was highly influential, as he pushed the idea that activist central banks can stimulate economic activity. Ben Bernanke was one of Fischer’s PhD students at Massachusetts Institute of Technology; he subsequently pursued aggressive stimulus efforts during the financial crisis.
Mark Carney, the Bank of England governor, said: “The combination of his encyclopedic knowledge of economics, outstanding judgment, quiet leadership and his perennial good humour has helped policymakers around the world to navigate one of the most challenging periods in the global economy.”