Policy: Economy

Sen. Elizabeth Warren questions Federal Reserve candidate Stanley Fischer on Citigroup ties

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Stanley Fischer, President Obama's candidate for vice chairman of the Federal Reserve, appeared to have relatively strong support from senators at his confirmation hearing Thursday.

But he did face a series of tough questions from Sen. Elizabeth Warren, the Massachusetts Democrat known as a critic of Wall Street, relating to his three years working for the megabank Citigroup in the early 2000s.

"The connection between Citigroup and Democratic administrations really sticks out,” Warren noted. “I think it’s dangerous if our government falls under the grip of a tight-knit group connected to one institution.”

“There is obviously something to be worried about," the 70-year-old Fischer said in response to Warren's question about a revolving door between the administration and Citigroup.

"But I think we ought to look at the other side of this," he added, explaining that his three years as vice chairman at Citigroup helped him understand banking when he later oversaw the financial sector as the head of Israel's central bank.

When Warren pressed him on the specific ties between Citigroup and Democrats, Fischer responded, "I don't see that as a particular problem, at least in my case," explaining that he didn't work at Citigroup at the same time as other Obama administration officials did.

Later, in response to a question from New York Democrat Chuck Schumer, Fischer expanded on his explanation that working for Citigroup had helped him, saying that it gave him confidence that he understood the status of the banking system during the panic in 2008.

Fischer said that when Lehman Bros. collapsed, "the headlines were blacker in the Israeli press then they were in the New York Times," but he was able to "give people confidence without exaggeration" because of his experience.

Among the other Obama administration officials who have worked for Citigroup is Treasury Secretary Jack Lew.

Other than when questioned by Warren, Fischer and two other candidates for the Fed's Board of Governors encountered few signs of opposition during the confirmation hearing.

In addition to heading the Bank of Israel and working at Citigroup, Fischer's background includes working at the International Monetary Fund and the World Bank. Earlier in his career, he gained influence and prestige in the academic world as a professor at the Massachusetts Institute of Technology, where he taught former Fed Chairman Ben Bernanke and European Central Bank president Mario Draghi.

Fischer was not questioned about other aspects of his background, although senators noted his experience with financial crises. Not only did he manage the Israeli central bank during the Great Recession, he also was the number-two official at the IMF during financial crises in Asia and Argentina, as well as during Russia's privatization.

Fischer was born in what is now Zambia and gained Israeli citizenship in 2005.

In his prepared statement, Fischer expressed support for the Fed's efforts to ease monetary conditions undertaken by Bernanke and current Chairwoman Janet Yellen, who he would be succeeding as vice chairman if confirmed.

During questioning, Fischer expressed the importance of reviving labor markets to the Fed's mission. "Anybody who has studied, and particularly who has studied this crisis, knows the cost of unemployment, understands that slow growth is not an abstraction -- slow growth is people not finding jobs, slow growth is problems for families in meeting even their food bill," he said. "And if one doesn't understand that one can't seriously be a policymaker."

The Senate Banking Committee, which approves candidates for the Fed before they are voted on by the full Senate, also questioned Lael Brainard, a former Obama Treasury official nominated for one of the open spots on the Fed's board. Jeremy Powell, a current Fed governor and a Republican up for a second term, also appeared before the committee.

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