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 "My three years at Citigroup were the most important element in my
education that enabled me to be an effective supervisor of banks,
which was one of my duties as governor of the Bank of Israel,"
Fischer told the Senate Banking Committee.
Fischer, 70, left Citigroup in 2005 to become Israel's top central
banker, a post he held until the middle of last year.
"Without that experience I would have come to it largely with an
academic background, without ever having seen the inside of a bank,"
he said.
His comments came in response to a query from Democratic Senator
Elizabeth Warren of Massachusetts, who suggested that the Obama
administration's penchant for tapping former Citigroup executives to
fill top economic posts potentially put the government "under the
grip of a tight-knit group" and made it vulnerable to "groupthink."
Treasury Secretary Jack Lew and U.S. Trade Representative Michael
Froman are among the top administration officials with Citigroup
ties, she noted. Citigroup, the third-largest U.S. bank, was one of
several firms bailed out by the U.S. government during the financial
crisis.
Fischer, who taught economics at the Massachusetts Institute of
Technology for years, is considered a leading light on monetary
policy. Before heading to Citigroup, where he was vice chairman, he
served as second-in-command at the International Monetary Fund and
as chief economist at the World Bank.
His role at Citigroup had been expected to draw some criticism, but
Warren was the only lawmaker to press the issue.
In fact, Senator Charles Schumer, a New York Democrat, rallied to
Fischer's defense.
"All too often we have regulators who don't understand how the
private sector acts, and the private sector runs rings around them,"
Schumer said. "Three years at Citibank I think should be an asset
rather than a liability."
APPROPRIATE POLICY MIX
The hearing did not offer much insight into Fischer's thinking on
monetary policy, but he suggested his views were largely in line
with those of Fed Chair Janet Yellen.
"I think the mixture that we are seeing coming out of (the) Fed now
is approximately appropriate," he told the panel.
Fischer said the high level of U.S. unemployment and low level of
inflation underscored the need for an easy monetary policy.
But he also said the Fed might face a more difficult policy calculus
as the economic recovery progresses.
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The U.S. central bank has kept interest rates near zero for more
than five years and bought trillions of dollars in Treasuries and
housing-backed securities to push down long-term borrowing costs and
rev up the economy.
In December it announced plans to trim its monthly securities
purchases with the aim of winding them down later this year as long
as the economy continues to improve.
"I think the exit is beginning, or has begun," Fischer said.
CAPITAL SURCHARGES
The panel used the hearing to vet two other Fed nominees: Lael
Brainard, who had served until recently as a top financial diplomat
at the U.S. Treasury, and current Fed Governor Jerome Powell, who
Obama has nominated for a fresh term.
Of the three, Brainard expressed the most concern about the state of
the job market, where unemployment years after the end of the
2007-2009 recession is a still high 6.7 percent.
"It is obvious that our job market is much weaker than it should be
at this point in the recovery," she said.
The senators devoted a chunk of the hour-and-a-half-long hearing to
banking regulation, but broke little new ground.
To reduce the likelihood that giant banks could fail and take down
the financial system, Powell said U.S. regulators were considering
capital surcharges for large banks based on their sources of
funding.
Brainard for her part said she would be open-minded on the question
of higher capital surcharges, which she said she would need to give
careful study. Fischer said he fundamentally agreed with both of his
"potential future colleagues" on the question.
But apart from Warren, the Fed nominees faced few pointed questions.
Both the panel and the full Senate are expected to ratify the
nominees' candidacies, although it is unclear when they will hold a
vote.
(Reporting by Jason Lange and Krista
Hughes; writing by Ann Saphir; editing by Paul Simao and Chizu
Nomiyama)
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