Stanley Fischer, the nominee for Federal Reserve vice chairman, defended his experience at Citigroup Inc., saying it was valuable in his role as bank supervisor.
“Without that experience I would have come to it largely with an academic background without ever having seen the inside of a bank and furthermore ever having been in the private sector,” Fischer, a former governor of the Bank of Israel, said today in his nomination hearing before the Senate Banking Committee.
Fischer was responding to a question from Senator Elizabeth Warren, a Democrat from Massachusetts, who asked if he was concerned that a number of former Citigroup executives have served in Democratic administrations. Fischer was a vice chairman of Citigroup (C) from 2002 to 2005.
“It’s dangerous if our government falls under the grip of a tight-knit group connected to one institution,” Warren said. “Former colleagues get access through calls and meetings, economic policy can be dominated by groupthink, other qualified and innovative people can be crowded out.”
Citigroup is the third largest U.S. bank measured by assets which totaled $1.9 trillion at the end of last year. As such it is subject to a special regimen of oversight and stress testing by the Fed. Warren, in recent hearings, questioned central bank officials on financial oversight.
“We are flattered, but perhaps the Senator is overstating our influence,” Molly Millerwise Meiners, a Citigroup spokeswoman, said in an e-mailed statement.
Treasury Secretary Jacob J. Lew was an executive at Citigroup’s global wealth management and alternative investment divisions from 2006-2009 before joining the Obama administration.
Robert Rubin, who served as Treasury secretary under President Bill Clinton, worked as a senior adviser to Citigroup executives from 1999 to 2009, a period that encompassed unprecedented taxpayer support for the bank during the 2008 financial crisis.
Fischer, 70, holds both U.S. and Israeli citizenship and lives in New York. He has taught at the Massachusetts Institute of Technology and served as chief economist at the World Bank and as a top official at the International Monetary Fund.
Allen Sinai, chief global economist at Decision Economics Inc. in New York, called Fischer “the most qualified candidate for the central bank of the United States that I’ve ever seen.”
“If we were to disqualify everybody who had some experience on Wall Street or in banking, we would leave ourselves with a too-narrow set of candidates.”
On monetary policy, Fischer described the Fed’s current stance as “approximately appropriate” even though there are “questions about the speed of the tapering.”
While the Fed must keep an eye on financial stability, “maintaining incentives to growth are appropriate at this time,” he said.
As the economy expands, central bankers will have to start talking about the “tradeoffs between inflation and unemployment,” he said.
“We are not there yet,” Fischer said. “We can focus on unemployment, and that is what we, the United States, needs to do.”
Also testifying to the committee were Fed governor nominees Lael Brainard, a former U.S. Treasury undersecretary, and Jerome Powell, who has continued serving as governor after his first term ended on Jan. 31.
The Federal Open Market Committee during its past two meetings cut monthly bond buying to $65 billion from $85 billion in December.
Policy makers, who will next gather March 18-19, have indicated they plan to taper purchases by $10 billion at each meeting absent a weakening in the economy. Bond purchases have pushed up the Fed’s balance sheet to a record $4.17 trillion.
To contact the editors responsible for this story: Chris Wellisz at email@example.com James L Tyson