Man Who Taught the Biggest Central Bankers Retires
Israel's Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid have nominated Jacob Frenkel to replace Stanley Fischer as the next governor of the Bank of Israel. Frenkel served two terms in that position from 1991 to 2000 and was known for being a tough inflation fighter.
But the global economy has changed dramatically since then, and so has Israel's.
"Frenkel will be judged by his ability to maintain continuity on transparency ... and policy goals" set by Fischer, said Zach Herzog, head of international sales at Psagot, Israel's biggest brokerage firm.
Before Frenkel moves in to the big office at the Bank of Israel, he must be approved by a special committee but that's expected to go smoothly.
As for Fischer, his influence extends far beyond the halls of power in Jerusalem and Tel Aviv's financial district.
Fischer taught two of the world's most powerful financial minds. Fischer advised Fed Chairman Ben Bernanke in his doctoral thesis at the Massachusetts Institute of Technology in the late 1970s. The paper was titled "Long Term Commitments, Dynamic Optimization and the Business Cycle." In the opening paragraph, young Bernanke thanked MIT's staff writing. "Deserving of special mention is my advisor, Stanley Fischer. Professor Fischer carefully read numerous drafts of my papers, annotating them with many excellent suggestions. His advice and encouragement throughout my entire graduate education is gratefully acknowledged."
Like Bernanke, while heading Israel's central bank Fischer was known for closely tracking how his policies would impact the Israeli employment landscape. Zack Miller, general partner at the Israeli venture capital fund OurCrowd, said: "Fischer lowered interest rates pretty aggressively when the global economy started dipping and was forced to fight the effects of a strong shekel over the past few years." Psagot's Herzog calls it "enlightened interventionism."
While at the Bank of Israel, Fischer also instituted a "Fed-like," six-member committee that made interest rate decisions.
Fischer also had another promising young student under his wing at MIT. The current head of the European Central Bank, Mario Draghi, was instructed by Fischer. The two remain very close. Draghi went to Jerusalem to attend a farewell conference in Fischer's honor last week.
Fischer, 69, will be stepping down two years before his second term as president of the Bank of Israel ends. He cited personal reasons for his decision to leave. He was appointed to the Bank of Israel in 2005 by then-Prime Minister Ariel Sharon. Sharon made the move at the urging of Netanyahu, then-Israel's finance minister. It's interesting to note that Netanyahu, who is currently the prime minister, also attended MIT, although he graduated two years before Fischer began teaching.
Netanyahu praised Fischer, saying he's been "a central partner in the state of Israel's economic growth and economic achievements. His experience, wisdom and international connections were crucial during a period of global economic crisis."
While managing Israel's troubled economy in the 1990s, Frenkel pushed for privatization of a once government-dominated economy. Frenkel has an economics degree from Hebrew University and a doctorate in economics from the University of Chicago. He boasts a long international resume, including positions as chairman of JPMorgan Chase International, vice chairman at AIG and chairman of Merrill Lynch International. Until he's confirmed, Fischer's deputy Karnit Flug will serve as acting governor.