Tags: Yellen | Fed | Fischer | Lenzner

When Yellen Closes 1 Faucet, Fischer Will Open Another

By Wednesday, 18 December 2013 07:15 AM Current | Bio | Archive

This afternoon could bring Ben Bernanke's swan song. His term in the Federal Reserve chair ends next month.

With Janet Yellen moving into the big office, President Obama will need a new Federal vice chair. Leaks last week say he has already settled on 70-year-old former Bank of Israel chief Stanley Fischer.

Fischer is an odd choice for several reasons, not least of which is his dual U.S.-Israeli citizenship. To me, however, the way bankers and financial pundits lauded him was even stranger. I've never seen anything like the rush to praise his every word and deed.

I suppose, if we must have central banks at all, Fischer's resume qualifies him for the job, but the outpouring of support was still over the top. For instance, consider Forbes writer Robert Lenzner. The Forbes website captured Lenzner's opinion in the headline: "A Perfect Ten Strike."

The column is even more effusive:

"[A] spectacular success steering the Israeli economy to superior economic growth."

"Whatever is necessary to put us on the right course, he [Fischer] will do. I have utter faith in him."

"This is his chance to be of use to the United States, and you can be sure he will make the most of it."

Lenzner is a fine writer and I respect his opinions. In this case, he is 100 percent in line with the Wall Street consensus. Every banker on the planet apparently loves Stanley Fischer — far more than Janet Yellen, who would nominally be Fischer's boss.

The banks clearly wish Fischer could take the head chair. Since that option is off the table, they hope Fischer will pat Yellen on the head and send her off to play while he lights up cigars with the good ol' boys and makes all the adult decisions.

What kind of decisions might those be? Lenzner gives it away. Right before pledging "utter faith" in the infallible Fischer, he states, "Fischer knows there is no limitation on how large the balance sheet of the Fed can be."

A-ha. See what is happening here? Fischer's will make sure Yellen keeps the money pumps churning. That is why Wall Street wants him at the table. It is the same reason they practically held their breath trying to make Obama choose Larry Summers.

They lost that round and got Yellen instead, mainly because Democratic senators signaled they couldn't stomach Summers. Fischer is their back-up plan.

The banks will likely win as the Fed keeps buying assets no matter who is in charge. If Obama installs Stanley Fischer at Yellen's right hand — and the Senate cooperates — all doubt will disappear.

We may indeed get the much-discussed taper, early next year if not today, but it won't mean the Fed pulled back. When Yellen closes one faucet, Fischer will open another one.

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This afternoon could bring Ben Bernanke's swan song. His term in the Federal Reserve chair ends next month.
Wednesday, 18 December 2013 07:15 AM
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