Citigroup Vice Chairman Fischer To Be Next Bank of Israel Governor

A vice chairman of Citigroup, Stanley Fischer, will be the next Bank of Israel governor, succeeding David Klein, Prime Minister Sharon’s office said yesterday.Mr. Fischer, 61, who was previously deputy head of the International Monetary Fund, agreed to take the job after it was offered several weeks ago by Mr. Sharon and Finance Minister Benjamin Netanyahu, Mr. Sharon’s office said in a statement posted on its Web site. Mr. Klein, who wanted a second term, was criticized by Mr. Netanyahu for tight monetary policy.Mr. Fischer would begin a five-year term, subject to cabinet approval, at a time when inflation is almost zero and lending rates are at an all-time low.Mr. Fischer “has the monetary experience and international stature to do wonders for the Israeli economy,” said the chief economist at Leader & Company Investment House in Tel Aviv, Jonathan Katz. “It’s a fabulous appointment, and I’m amazed that he accepted it.”Mr. Sharon called the appointment “a golden opportunity for the Israeli economy.”Mr. Fischer, an economics professor at Massachusetts Institute of Technology for 22 years, was a visiting professor at Hebrew University in Jerusalem in 1972 and is a frequent adviser to the Israeli government on financial issues. He is also a close friend of former Bank of Israel Governor Jacob Frenkel, himself a former research director at the IMF and now chairman of Merrill Lynch & Company’s international division.Born in Zambia to parents of Lithuanian descent, Mr. Fischer is a naturalized American citizen. He is Jewish, speaks some Hebrew, and will be granted Israeli citizenship upon his request to immigrate, Mr. Sharon’s office said. Mr. Fischer didn’t return a call left on his office voice mail in New York seeking comment.As the IMF’s first deputy managing director from 1994 to 2001, he helped engineer $300 billion in agency-led loans and credit lines to help prop up emerging-market currencies from Thailand’s baht to the Russian ruble. He earlier served as a World Bank vice president for development economics and as chief economist.In December 1997, when South Korea was out of money to repay debt and its currency touched a record low against the dollar, Mr. Fischer said the fund and other donors would provide $10 billion in new aid. The currency gained 22% the next day, and the economy began pulling out of recession, growing 8.8% in 2000.Other IMF loans were less successful. Russia defaulted on $40 billion of bonds and devalued the ruble in August 1998, less than a month after the IMF approved new loans for the country. In December 2001, Argentina defaulted on $95 billion of bonds and then devalued its currency after the government tapped $20 billion of IMF loans over a decade.Mr. Fischer joined Citigroup in February 2002 and in June that year was named president of a unit set up to expand the largest financial services company’s business outside of America.Israel will benefit from Mr. Fischer’s political experience, said Roger Kubarych, a former American Federal Reserve economist and now an adviser at HVB Group in New York.Outgoing governor Klein’s five years in office were marked by criticism of his management of Israel’s worst-ever recession, which began at the end of 2000 amid renewed conflict with the Palestinians and a global technology slump.Mr. Klein lowered Israel’s base lending rate by 2 percentage points in December 2001 to a then-record low 3.8%, setting off an 18% slide in the shekel’s value against the dollar over the next six months. He then boosted the rate to a two-year high of 9.1%, raising the cost of credit while the economy was contracting.Critics said Mr. Klein acted too slowly to cut the rate again at the start of 2003. The base rate was lowered by 5 percentage points through April, then held at 4.1% until the end of November. Mr. Klein has since trimmed another 0.4 point to bring the rate to 3.7%.The economy recovered slowly in 2003, with gross domestic product expanding 1.3%. It picked up speed to a preliminary 4.2% last year, according to the Central Bureau of Statistics. The Bank of Israel expects growth to slow to 3.2% this year.Mr. Klein also was criticized for his handling of bank regulation. Bank of Israel regulators failed to detect embezzlement by a manager at Trade Bank Limited, one of Israel’s smallest commercial lenders, until the bank collapsed in 2002 with $57 million missing.That same year the Bank of Israel also failed to uncover problems at the government-owned Industrial Development Bank Limited and had to provide a special credit line to keep the commercial bank afloat until it sells its assets and loan portfolio.

Citigroup Vice Chairman Fischer To Be Next Bank of Israel Governor

Citigroup Vice Chairman Fischer To Be Next Bank of Israel Governor

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