How Stanley Fischer Became a Central-Banking Legend

Stanley Fischer at the Asia-Global Dialogue conference in Hong Kong, on Dec. 5 Photograph by Jerome Favre/Bloomberg

Stanley Fischer may be the best-connected central banker in the world and among the most admired. Now he’s the leading candidate to become vice chairman of the Federal Reserve, according to people familiar with the selection process who spoke with Bloomberg.

Fischer, 70, served eight years as chief of the Bank of Israel and helped the small, open economy come through the global financial crisis with minimal damage. Afterward, with housing prices rising, Fischer pivoted to regulation aimed at preventing the kind of asset bubbles that blew up disastrously in the U.S. In an earlier stint in Israel in the 1980s he helped quell a bout of hyperinflation. In the 1990s he battled emerging-market crises as first deputy managing director of the International Monetary Fund.

Fischer was the Ph.D. thesis adviser to Ben Bernanke when the current chairman of the Federal Reserve was a student at Massachusetts Institute of Technology. He also taught Mario Draghi, Larry Summers, and Greg Mankiw (president of the European Central Bank, former U.S. Treasury secretary, and onetime chief economic adviser to President George W. Bush, respectively). It’s hard to beat that list.

Last month Fischer was honored at an International Monetary Fund conference at which Bernanke, in his prepared remarks, called him “a role model and a frequent adviser” who has “served at the front lines.” Fischer was named by some observers as a possible candidate to succeed Bernanke in February before the race narrowed down to Summers and the Fed’s current vice chairman, Janet Yellen, who eventually won Obama’s nomination.

Bloomberg reports that Fischer was the first central banker to cut interest rates in 2008 at the start of the financial crisis and the first to raise them the following year in response to signs of financial recovery. Lately the Bank of Israel has bought large quantities of dollars with shekels to try to prevent an increase in the value of the Israeli currency that would harm Israel’s competitiveness in global markets.

“It is testament to Stan’s skillful handling of Israel’s economy that it is one of the very few advanced economies whose output increased every year through the crisis period,” former Bank of England Governor Mervyn King said earlier this year. King also worked at MIT.

Global Finance magazine gave Fischer a “A” grade in 2012, compared with Bernanke’s “B” and Draghi’s “B-”.

Fischer’s personal journey is unusual. He was born in Northern Rhodesia, now Zambia, and moved to the U.S. before going to Israel. He earned bachelor’s and master’s degrees at the London School of Economics, got his Ph.D. at MIT, became a U.S. citizen, and taught at the University of Chicago before returning to MIT. He also had top posts at the World Bank, the IMF, the Group of Thirty, and Citigroup—all before becoming governor of the Bank of Israel in 2005. He stepped down from that job on June 30.

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