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  December 23, 2013

A Look at Who's Poised to Become No.2 at the Fed


Gerald Epstein: Former Bank of Israel Chief Stanley Fischer will likely become the Vice Chairman of the Federal Reserve, but his record shows consistent catering to Wall Street rather than bringing the country to full employment
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biography

Gerald Epstein is codirector of the Political Economy Research Institute (PERI) and Professor of Economics. He received his Ph.D. in economics from Princeton University. He has published widely on a variety of progressive economic policy issues, especially in the areas of central banking and international finance, and is the editor or co-editor of six volumes.


transcript

A Look at Who's Poised to Become No.2 at the FedJESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore. And welcome to this edition of The Epstein Report.

Now joining us is Professor Gerry Epstein. He is the codirector of the Political Economy Research Institute, otherwise known as PERI, and a professor of economics at UMass Amherst.

Thanks for joining us, Gerry.

GERALD EPSTEIN, CODIRECTOR, PERI: Thanks for having me.

DESVARIEUX: So, Gerry, what are you tracking in the world of economics this week?

EPSTEIN: Well, I'm tracking word that came out that President Obama is likely to name Stanley Fischer to be the vice chair of the Federal Reserve. As you know, Janet Yellen was nominated to be chair, and her--it looks like she's going to make it through the process, and so she'll soon be the chair. She was the vice chair, and now there has to be somebody to replace her, and President Obama has let it be known that he's likely to nominate Stanley Fischer.

Now, who's Stanley Fischer? Stanley Fischer is a very well known economist from MIT who was also the first deputy managing director of the IMF from 1994 to 2001. Most recently, he has been the governor of the central bank of Israel. And in between, he did a stint with Robert Rubin at Citibank.

And the business press is salivating. They think this is a great appointment, that he will be--he's kind of a central banker's banker. But I have some serious doubts about whether this is actually a very good appointment as the vice chair.

The problem is that Stanley Fischer, as much as anybody else, is responsible for the kinds of economics that led us into the great depression--or quasi great depression, if you want to call it that--that we are experiencing at the moment. He is a mainstream economist who is a strong believer in the efficiency of financial markets, a strong believer in the usefulness of capital flows from one country to another. And at the IMF he oversaw the conditionality and the restructuring during the Asian financial crisis. He took South Korea, which was a pretty well functioning economy that had a financial crisis, and used the--he and the other members of the IMF and the Treasury Department under Larry Summers, and used their power to restructure the Korean economy as a neoliberal type of economy.

Generally speaking, he's very much in favor of mostly free market economics. Of course, he's not stupid. He's very smart. And he's learned over time. But basically he's one of the architects of the Washington Consensus, which is has gotten us into this mess to begin with.

But on top of that, he was a vice president at Citibank from 2002 to 2005, during the time when Citibank was developing enormous leverage, new risky products, essentially getting insolvent and helping to drive the U.S. and the global economy into the tank in the process. He was sitting there at Citibank under Robert Rubin, and as far as anybody can tell, did very little to try to stop that kind of policy, and probably profited quite handsomely from it.

Now, as head of the central bank in Israel, he did apparently a very good job of keeping the economy afloat, controlling inflation, etc. But Israel is a very different country than the United States. It's a very small country. It's highly constrained by the global financial markets. It has a lot of constraints that the U.S. economy does not have.

The U.S. economy, at the Federal Reserve, at the U.S. economy, should be promoting high employment, full employment, using all the tools that it can to promote more employment. That's what Janet Yellen wants to do. But now with Stanley Fischer sitting at her side, possibly questioning what she does, trying to be more hawkish on inflation, trying to be less tough on the banks, it will make it harder for Janet Yellen, rather than easier, for her to undertake the kinds of policies that we need to get the economy going.

So I hope that the Congress looks quite closely at Stanley Fischer's record. I think he's probably kind of a Larry Summers in sheep's clothing, and it's not clear that he's the best person for this job.

DESVARIEUX: Alright. Professor Gerry Epstein, always interesting analysis. Thank you so much for joining us.

EPSTEIN: Thank you.

DESVARIEUX: And thank you for joining us on The Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.



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