It is “natural” to be concerned about outsized political influence by large financial institutions, according to a top nominee to join the Federal Reserve.
Stanley Fischer, tapped by the president to serve as the Fed’s vice chairman, told members of the Senate Banking Committee Thursday that it obviously would be a concern if a handful of big banks or a single institution gained a disproportionate amount of say in the federal government. But at the same time, he said, Congress should not fret about the time he spent at Citigroup, one of the nation’s largest banks.
Fischer made his remarks in response to questions from Sen. Elizabeth Warren (D-Mass.). The outspoken big bank critic pointed out that if confirmed, Fischer would join a number of top officials in the Obama administration that spent time working at the bank. Treasury Secretary Jack Lew and U.S. Trade Representative Michael Froman both spent time there, and Fischer spent three years as a vice chairman of the bank.
{mosads}“Are you concerned about the revolving door between recent Democratic administrations and Citigroup?” Warren asked.
“There is obviously something to be worried about,” Fischer responded.
But at the same time, he said, the years he spent working for a private bank provided critical insight when it comes to overseeing banks, as he would at the Fed.
“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. “I thought that experience was extremely valuable.”
He also made the point that while several Obama officials spent time at Citigroup, it was not as if they all worked closely together, or at all in many cases.
Fischer, who previously served as an instructor to former Fed Chairman Ben Bernanke as the head of the central bank of Israel, appeared poised to assume the vice chairman spot following the hearing. Several members of the panel heaped praise on the nominee, citing his extensive record as an academic and leader of the foreign central bank.
“You’re one of the most brilliant people in terms of how a central bank should be run,” said Sen. Charles Schumer (D-N.Y.).
Fischer appeared before the banking panel alongside Lael Brainard, a former top Treasury Department official nominated to join the Fed, and Jerome Powell, a Fed governor seeking confirmation to a full 14-year term.
Chairman Tim Johnson (D-S.D.) called all three picks “very well qualified.”
Both Powell and Brainard emphasized in their testimony that the Fed is at a crucial juncture, and vowed to work hard to smoothly steer it to the exit.
The Fed is currently attempting to wind down years’ worth of economy stimulus, as it slowly reduces the size of monthly bond purchases that make up its latest round of “quantitative easing.” The Fed has endeavored to calm markets as it steps away from the support, saying the wind-down will be gradual and can be adjusted if the economic recovery does not proceed as expected. Markets were initially roiled at the suggestion of the stimulus taper, but have taken the reductions largely in stride over the last few months.
“Important challenges lie ahead, and I am eager to play my part in meeting them,” said Powell, who has served on the Fed for the last two years.
“I cannot think of a more important moment for the Federal Reserve,” added Brainard.
The three nominees also endeavored to highlight their appreciation for the human cost of the financial crisis and economic downturn, assuring lawmakers they would keep that in mind as they crafted monetary policy.
“Policymakers should never forget the human beings that are unemployed, nor the damage that high inflation wreaks on the economy,” said Fischer.
On policy, Fischer struck a similar tone to that of Fed Chairwoman Janet Yellen, defending the Fed’s contentious policy as provided needed support, even as the Fed works to wind it down.
“At present, achievement of both maximum employment and price stability requires the continuation of an expansionary monetary policy,” he said.
If the three are confirmed by the Senate, the Fed will still have one seat open on its seven-member board. A spot opened Wednesday, when former governor Sarah Bloom Raskin was confirmed by the Senate to serve as the deputy secretary of the Treasury.