Filling Stanley Fischer’s Unpredictable Shoes

Much has already been written of Governor of the Bank of Israel Stanley Fischer’s resignation. It is not secret that I have been a big fan of Fischer’s throughout his term and the way in which he completely changed the role of the leading banker in a financial system. I want to focus on what I think was Fischer’s most important contribution to the stability of Israel’s economy, his unpredictability.

Stanley Fischer kept the markets guessing. He bought dollars when nobody expected it, he raised and lowered interest rates against conventional wisdom and he held the Israeli Government’s proverbial feet to the fire on housing prices when it is not obvious that it was in his purview. He quietly but forcefully brought down the corrupt Dani Danknerfrom his role in Bank Hapoalim and reigned in lending risks the banks were taking, calmly but with determination. He was unconventional in the timing of his policy decisions but at the same time his demeanor and seniority made the markets comfortable. This combination of unpredictability and projected stability is critical to keeping speculators from exacerbating already vacillating markets and for laying the groundwork for necessary changes.

This must continue. Speculators abound in Israel’s stock and real estate markets and they must be kept at bay for economic stability to continue. Straddling the fence of unpredictability and responsible adult is a difficult dance and Fischer will be a tough act to follow. But the next Governor of the Bank of Israel must follow that same dance or the speculators and instability will arrive quickly at Israel’s doorstep. One thing is for sure, I will miss Stanley but I hope and pray his style and legacy will continue.

[Originally published on 2nd February 2013 by MIchael Eisenberg]