Three Fed nominees face Senate hearing Tuesday

The Senate banking committee Tuesday will question President Obama's three nominees for the Federal Reserve's Board of Governors, including former Bank of Israel governor Stanley Fischer as vice chair.

Although the three are expected to win confirmation, the hearing will give committee members a chance to grill Fischer about his views on how quickly the Fed should wind down its stimulus.

The other nominees are former Treasury under secretary Lael Brainard and current Fed Governor Jerome Powell, who has been renominated.

During new Fed Chair Janet Yellen's recent banking committee testimony, Sen. Bob Corker, R-Tenn., gave Fischer a vote of confidence, telling Yellen he's "a very impressive person and I think he's a very good complement to your background."

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Unlike Yellen, Fischer has extensive international experience. He's also hailed as a skilled crisis manager.

As head of Israel's central bank, Fischer, 70, was among the world's first banking officials to cut interest rates in the early days of 2008 financial crisis and the first to raise them as Israel's economy and financial system stabilized. And he spearheaded ambitious purchases of bonds to lower long-term interest rates — a program similar to the Fed's bond-buying initiative, which is gradually being scaled back as the U.S. economy improves.

Fischer also has been the World Bank's chief economist and a deputy managing director of the International Monetary Fund. When he was an MIT economics professor, he was a mentor to former Fed chairman Ben Bernanke and taught luminaries such as European Central Bank President Mario Draghi.

"There just aren't that many people that have done practical policymaking in an international environment and have the academic credentials," says economist Paul Ashworth of Capital Economics.

Fischer's views are expected to hew closely to Yellen's, who is considered to be! more concerned about spurring growth and lowering unemployment than in heading off high inflation or financial asset bubbles.

But Fischer has shown he's independent-minded, once raising questions about the Fed's strategy of stating that short-term interest rates would stay low for an extended period. "If you give too much forward guidance, you do take away flexibility," he told the Wall Street Journal.

Still, Ashworth says, "I don't think he's going to say anything that deviates from current Fed policy" on Tuesday.

Yellen told the banking committee last week that she expects the Fed to continue to reduce its monthly bond purchases "in measured steps" unless the outlook for the economy and labor market change significantly. She said bad weather across much of the country may be the cause of a recent slowdown in job growth.

Brainard, 51, was Obama's top Treasury official handling international affairs. Powell, 61, who first joined the Fed's board in 2012, was a senior Treasury official in the administration of George H.W. Bush.

"I suspect all three will just cruise through" the confirmation process, Ashworth says.