|
 Fischer, 70, is widely respected as one of the world's top monetary
economists. He is seen as a pragmatic policymaker and has praised
the Fed's extraordinary steps to boost the U.S. economy. At the
Massachusetts Institute of Technology, he once taught current Fed
Chairman Ben Bernanke and Mario Draghi, the European Central Bank
president.
Yellen, the Fed's vice chair, is expected to win approval from the
U.S. Senate next week to take the reins from Bernanke, whose term
ends in January.
Fischer, who was born in Zambia and has Israeli and U.S. dual
citizenship, would also need Senate approval if he accepts the offer
from the White House. "He's been offered the job" said the source,
who declined to be named.
The White House declined to comment. A Fed spokeswoman said the
White House was responsible for nominations.
Fischer, who could not immediately be reached, has held top-level
posts at the World Bank and the International Monetary Fund, and was
credited with guiding Israel through the global economic crisis with
minimal damage. For the Fed, he would bring the fresh perspective of
an outsider, especially on communications, yet offer some continuity
too.
He is "difficult to characterize with a term as obtuse as 'hawk' or
'dove' because he takes a balanced, academic approach to various
topics of debate," said Thomas Simons, an economist at brokerage
Jefferies.
"However, given that he played an instrumental role in helping Ben
Bernanke form his views on monetary economics, his presence at the
Fed would represent some consistency in this time of transition."
Fischer would arrive at a U.S. central bank starting to navigate a
return to normalcy after taking dramatic and unprecedented steps to
emerge from the Great Recession of 2007-2009.
The Fed is now wrestling with the decision of when to scale back its
huge bond-buying program that sought to drive down long-term
borrowing costs and swelled its balance sheet to some $4 trillion.
It buys $85-billion a month in Treasuries and mortgage bonds in its
current, third round of "quantitative easing," or QE3.
At an IMF economic forum on November 8, held in Fischer's honor, he
suggested he is a strong believer in the effectiveness of the Fed's
unconventional policies.
"It's very hard to reach the conclusion that the unorthodox measures
are ineffective," Fischer said of the bond buying, acknowledging the
policy is controversial.
"They appear to be effective and they essentially do that by working
off either the provision of liquidity in markets where liquidity has
effectively dried up, or by changing interest rates other than the
central bank interest rate," he said on a panel seated next to
Bernanke.
As Fed vice chair, Fischer would have a strong hand in shaping
policy. Yellen, who has held the post since 2010, was a driving
force behind the Fed's adoption last year of an inflation target, an
important policy milestone for the bank.
One possible source of tension may be how to telegraph the Fed's
policy intentions. While Yellen and Bernanke have tied a rate rise
to future levels of unemployment and inflation, Fischer has publicly
warned about central banks giving so-called forward guidance that is
too precise.
"He's going to think outside of the box, he's going to push the Fed
a little bit, and that's not a bad thing," said Diane Swonk, chief
economist at Mesirow Financial in Chicago.
Fischer "is very cognizant of what you can and can't communicate,
and I'm not sure the Fed is always so sensitive about that."
Bloomberg News and Israel's Channel 2 earlier reported Fischer as
the front runner for Fed vice chair.
If he takes the job, it would be the second time this year a major
central bank made a high-profile hire from abroad. The Bank of
Canada's chief Mark Carney earlier this year became the first
foreigner to lead the Bank of England.
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"NEARING A DECISION"
The Fed's seven-member board is depleted and risks thinning further.
Elizabeth Duke stepped down in August, Sarah Raskin is set to leave
for a job at the U.S. Treasury, and Bernanke is expected to depart
when his term as chair expires Jan. 31.
With Yellen set to become the first woman to take the helm, some
economists and investors had speculated that Jeremy Stein, a
well-respected Fed governor and former Harvard professor, would be
tapped to replace her. Some observers expect that he too could leave
and return to Harvard if Fischer steps in.
Next week, the Fed holds a highly-anticipated policy meeting at
which officials could announce the beginning of the end of QE3,
given the improvement in the U.S. labor market. It will be
Bernanke's second-last as chair.
Fischer "is a very qualified and very solid vice chair candidate,
and I don't see on what grounds his nomination would fail," said
Roberto Perli, a partner at economic research firm Cornerstone Macro
and a former senior Fed official.
"He seems to complement and balance Yellen pretty well ... and he is
probably more sensitive than Yellen to financial stability issues,
and that is a good thing."
Fischer, a naturalized American citizen, quit his job as head of
Israel's central bank on June 30, three years into his second
five-year term.
Asked about his next job at a conference in Tel Aviv on Monday, he
said: "The advice I received was not to accept a position until I
had waited at least six months, which is in three weeks, so it seems
like I am nearing a decision."
Once chief economist at the World Bank and then first deputy
managing director of the IMF from 1994 to 2001, Fischer was a key
figure in the IMF's Mexican bailout after the peso crashed in the
mid-1990s and the fund's main firefighter as it sought to douse the
flames of the Asian financial crisis.
At the time, he negotiated repeatedly with troubled countries,
jetting from one to the next as a financial storm swept through the
world's emerging markets. Robert Rubin, the influential former U.S.
Treasury secretary, once described Fischer as the "unsung hero" of
the crises.
During his tenure in Israel, the country's economy performed better
than most. Despite a focus on fighting inflation, Fischer slashed
rates and went against his own policy of staying out of financial
markets by buying up tens of billions of dollars to weaken the
shekel and help prop up local exporters.
While he began cutting rates in 2008 before other major central
banks in a bid to head off the worst of the recession, he also was
among the first to raise them, a year later.
He "was very proactive with a dovish bias when necessary," said
Benoit Anne, head of emerging-market strategy at Societe Generale.
"Fischer will bring a valuable awareness of the impact of Fed
policies on the outside world, including emerging markets (meaning)
the process of Fed policy exit may be better managed from a
collateral damage perspective."
Fischer was a vice chairman of Citigroup prior to joining the Bank
of Israel. He had sought the top job at the IMF in 2011 but was
disqualified due to his age.
If Fischer is nominated and approved by the U.S. Senate in time to
take the reins from Yellen, it would be the first time in Fed
history that the two top posts at the central bank are filled at the
same time.
The closest to that the Fed has ever come was in 1979, when Paul
Volcker took over as Fed chair less than two weeks after Vice Chair
Frederick H. Schultz started his job.
(Additional reporting by Ann Saphir in
San Francisco; Writing by Jonathan Spicer; editing by Leslie Adler,
James Dalgleish and Andrew Hay)
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