more mortgage meltdown
Whitney Tilson

I recently posted an article about Whitney Tilson’s trip to israel. Here is another interesting story that Tilson describes below:

(Happy Thanksgiving)

I forgot to tell this story from my Israel trip: on Monday morning (11/15) Stanley Fischer, the Governor of the Bank of Israel (the equivalent of Ben Bernanke), spoke to us.  He was INCREDIBLY impressive – it was clear to everyone in the room that he was a major reason why Israel’s banks were boring and underlevered, such that Israel largely sailed through the global crisis that destroyed so many other emerging, high-growth economies like Ireland and Iceland.  His accomplishments have not gone unnoticed – here’s a summary from the Wikipedia page about him (http://en.wikipedia.org/wiki/Stanley_Fischer):

He became Governor of the Bank of Israel on May 1, 2005, replacing David Klein, who ended his term on January 16, 2005. Fischer became an Israeli citizen, the aforementioned action being a prerequisite to this appointment. He has been involved in the past with the Bank of Israel, having served as an American government adviser to Israel’s economic stabilization program in 1985. On May 2, 2010, Fischer was sworn in for a second term.[1]

Under his management, in 2010, The Bank of Israel was ranked first among central banks for its efficient functioning, according toIMD’s World Competitiveness Yearbook.[2]

Fischer has earned plaudits across the board for his handling of the Israeli economy in the aftermath of the global financial crisis. In September 2009, the Bank of Israel was the first bank in the developed world to raise its interest rates.[3]

In 2009 and 2010, Fischer received an “A” rating on the Central Banker Report Card published by Global Finance magazine.[4][5]

In October of 2010, Fischer was declared Central Bank Governor of the Year by Euromoney magazine. Fischer received the award at a reception at the Willard Intercontinental hotel in Washington, D.C. during a World Bank and International Monetary Fundconference.[6]

After hearing his opening remarks, I raised my hand and asked, “What would we need to offer you to get you to come to the U.S. and replace Ben Bernanke?”  After the laughter died down, I said, “Seriously, has Israel ever tried quantitative easing, and what are your views on QE2 being tried in the U.S.?”

My first comment really irritated him – little did I know that he was Bernanke’s adviser on his graduate thesis and they are apparently close personal friends!  He replied something along the following lines: “I want to take issue with the first thing you said.  Ben Bernanke deserves enormous credit for his actions in the depths of the crisis in late 2008.  The United States was on the brink of another Great Depression and he played a key role in avoiding this.  Yes, things are tough now, but there’s a big difference between 10% unemployment and 25%.”

I agree with him – it’s the latest round of quantitative easing that troubles me (I don’t have a firm opinion on it – I’ve heard powerful arguments on both sides).

There was media in the room, and they followed up with him about this afterward, so there were many news stories like the one below:

Bank of Israel Governor Stanley Fischer said criticism of the U.S. Federal Reserve for its latest round of monetary stimulus is “fundamentally misplaced.”

“I see this as a move which is healthy for the global economy, while creating some problems for us and the rest of the world,” Fischer said in a conference call with reporters today. “I do not see it as the U.S. shirking its responsibilities. I think its main responsibility is to get itself back to health and growth as rapidly as possible.”

Another interesting note: Guy Spier asked him about his views on rapidly rising housing prices in Israel.  His reply made it clear that he was very concerned about a speculative bubble and was taking strong steps to combat this.  In total contrast to Alan Greenspan and Ben Bernanke, he views it as a central bank’s job to not only identify bubbles, but also take firm steps to combat them.  I can only sigh and wonder how our history might have been different had Fischer been head of our Fed over the past decade…