AIPAC's
Fed Candidate Stanley Fischer on a Warpath
against Iran
Dual-citizen nominee's
lifetime benefit to Israel comes at a heavy
cost to America
By Grant F. Smith, Director of Research, IRmep
The rushed
campaign to insert Stanley Fischer straight from his position leading
Israel's central bank into the number two spot at the Federal Reserve
has allowed little time for research into the appointee's career or for
informed public debate about his record. Like the failed recent Obama
administration-Israel lobby pincer move to ram approval for U.S.
military strikes on Syria through Congress, avoiding such due diligence
through velocity may actually be the only means for successful Senate
confirmation.
Some of Fischer's accomplishments—from co-authoring
a seminal textbook on macroeconomics to handling economic crisis at the
IMF have—not surprisingly—been recalled by his many supporters. Other
doings that shed light on Fischer's controversial attributes—such as
overhauling how U.S. aid and trade packages are delivered to Israel—have
been mostly ignored. Appointing an openly dual Israeli-American citizen
into the most important central bank in the world could be a watershed
moment. While the doors of federal government have long swung open for
Israel-lobby appointees focusing most—if not all—their energies on
advancing the interests of a foreign state, any who were actually
Israeli dual citizens have traditionally kept that a closely-guarded
secret. Fischer's long-term boosters, including the American Israel
Public Affairs Committee (AIPAC), likely want to accustom Americans to
openly dual citizens circulating between top roles in the U.S. and
Israeli governments. A closer examination of Fischer reveals that
average Americans have good reason to oppose his appointment, because
his lifelong achievements for Israel have imposed high costs and few
benefits to the United States while making peace more difficult to
achieve.
Economics
Stanley Fischer was born in Northern Rhodesia in
1943. He studied at London School of Economics and received a PhD in
economics from MIT. He taught and chaired the MIT economics department
and co-authored a leading macroeconomics textbook with Rudiger Dornbusch.
Fischer joined the World Bank in 1988 and became the first deputy
managing director of the International Monetary Fund (IMF) in 1994. He
oversaw emergency bailout lending and austerity programs over Mexico,
Thailand, Indonesia, Russia, Brazil and Argentina. High flying
Citigroup—under the helm of Sanford "Sandy" Weill—recruited Fischer in
2002. There he rose to become vice president with a seven-figure pay
package.
Israel
Fischer has
not only been an ardent supporter of
Israel, his professional efforts began when he took sabbatical leave to
Israel in 1972 and 1976-1977. He was a visiting scholar at the Bank of
Israel in 1980. More importantly for Israel, Stanley Fischer won an
appointment to the Reagan administration's U.S.-Israel Joint Economic
Discussion Group that dealt with Israel's 1984-1985 economic crisis. In
October of 1984, Israeli Prime Minister Shimon Peres arrived in
Washington asking an initially reluctant Reagan Administration for an
additional $1.5 billion in U.S. emergency funding—over and above the
already-promised aid $5.6 billion aid package.The help amounted to U.S. taxpayers funding each Israeli citizen
$1,650. Another key component of the plan called for a largely
unilateral lowering of U.S. tariffs and trade barriers to Israel, a
program initially called "Duty
Free Treatment for U.S. Imports from Israel" but later repackaged
and sold as America's first "free trade" agreement. Over time the FTA
reversed a previously balanced U.S.-Israel trading relationship for one
that has produced a
cumulative deficit to the U.S. that passed $100 billion in 2013.
Seventy American industry groups opposed to the give-away in 1984 were
disenfranchised when Israeli Economics Minister Dan Halpern and AIPAC
illegally obtained a classified compendium of their industry, market and
trade secrets to use against them in lobbying and public relations. An
FBI espionage and theft of government property investigation was quashed
before it could narrow in on those inside the U.S. government who
delivered the secrets to Halpern.
The
U.S.-Israel Joint Economic Discussion Group fundamentally transformed
U.S. aid to Israel forever. Before the Reagan administration, most U.S.
aid to Israel took the form of loans that had to be repaid with
interest. After the input of Fischer's team, subsequent U.S. aid was
delivered in the form of outright grants paid directly from the U.S.
Treasury—never to be repaid or conditioned when Israel took actions the
U.S. opposed.
Like many of Fischer's later IMF austerity
programs, the Joint Discussion Group initially announced that strings
attached to the aid would make it temporary. Secretary of State George
Shultz insisted during a 1985 address to AIPAC that "Israel must pull
itself out of its present economic trauma . . . . No one can do it for
them . . .our help will be of little avail if Israel does not take the
necessary steps to cut government spending, improve productivity, open
up its economy and strengthen the mechanisms of economic policy. Israel
and its government must make the hard decisions. Shultz wanted to make the huge American cash
transfer conditional on major Israeli economic reforms, but intense
AIPAC lobbying in Congress threatened to make the State Department
influence irrelevant. In the end, Congress delivered aid without
Israeli sacrifices, such as selling off bloated state-owned industries
and spending belt-tightening. The proposed privatization of $5 billion
in state enterprises threatened too much bureaucratic "turf" and too
many jobs, so Israel put them on hold. Fischer apologetically
characterized the Likud years as a "wasted opportunity by a government
that should have known better.Not until 1996 were Fischer's proscribed economic remedies adopted by
American neoconservative consultants to Benjamin Netanyahu as minor
points in the "Clean Break"
manifesto for Israeli regional hegemony. They remain among the few
unimplemented tasks in a plan that called for military action against
Iraq, Syria, and Lebanon.
Despite the
absence of any real economic reforms that would take Israel off the
American taxpayer dole, Fischer co-wrote a blustering 1986 article for
the Wall Street Journal called "Israel Has Made Aid Work" that AIPAC
circulated widely as
an official memorandum of its achievements. "Israel is the largest
single recipient of economic aid from the U.S. This is partly because
the economic stability of Israel is uncertain and is important to U.S.
national interests. Therefore a report on the progress of the Israeli
economy is relevant to policy decisions to be made here." Fischer never
bothered to substantiate his premise, that U.S. national interests were
somehow served by the bailout or that any aid given to Israel produced
tangible benefits. Instead Fischer delivered a fusillade of dry and all
but unreadable statistics about Israel's temporary economic
performance. Issues of long-term importance to most Americans, such as
returning U.S. aid to the traditional format of loans to be repaid and
the likely impact of the FTA on U.S. jobs went unaddressed by Fischer.
Fischer's core achievement—that the transformation of aid from loans to
outright taxpayer give-aways—has been unchanged since 1986. The
premises behind this ever-increasing entitlement and one-sided FTA
performance are likewise never reexamined by Congress—despite the fact
that a majority of polled Americans have come to oppose aid increases to
Israel. Fischer's rare admonitions that Israel be held to account,
unlike the economies he transformed through biting IMF austerity
programs, have remained nothing more than lip service.
At the end of 2004 Israel's U.N. ambassador
recruited Fischer to become the head of Israel's central bank, asking,
"Why not be our governor? Fischer accepted and initially provided endless amusement to reporters
by insisting on speaking Hebrew during press conferences and refusing to
speak English. Initial concerns that Fischer's global stature and
experience would overshadow and chafe the relevant players in Israel
proved unfounded as Fischer moved energetically into his new role. AIPAC
continued to trumpet Fischer's accomplishments steering Israel through
the global financial crisis, though beneath the surface
he was
performing far more serious tasks for Israel and its global lobby.
Iran Sanctions
As Bank of Israel governor, Stanley Fischer played
a central role in coordinating the implementation of AIPAC-generated
sanctions against Iran—ostensibly over its nuclear program. Stuart
Levey, the head of the U.S. Treasury Department's division for
"Terrorism and Financial Intelligence," an office
created after heavy AIPAC lobbying, met often with Fischer in Israel
alongside the Prime Minister, Foreign Minister and chiefs of both the
Mossad and Shin Bet to explore how to "supplement" UN sanctions and
end-run Russian and Chinese opposition. The Levey-Fischer strategy was "to work outside the context of the
Security Council to engage the private sector and let it know about the
risks of doing business with Tehran" particularly against European banks
that had only partially drawn back their business dealings with Iran.
In 2010, Israel dispatched Fischer to meet with Chinese and Russian
"counterparts" in order to financially isolate Iran. Fischer's final official duties for the Israeli
government included drilling for "big crisis" scenarios—specifically,
Fischer told an Israeli television station—the unavoidable financial
fallout of a military attack on Iran. "We do plans, we do scenarios, we do exercises about how the central
[bank] will work in various situations.
After years targeting Iran, Fischer became convinced in his final months
in Israel that sanctions alone were not enough to collapse its economy.
Fischer reluctantly concluded that even as Iranian economic prospects
"continue to go down" the country would likely "find a way to continue
to keep economic life going. Fischer suddenly resigned and left the Bank of
Israel on June 30, before completing his second five-year term.
Israelis into the Fed and then where?
The last time
Fischer's name was floated to lead a major organization was during a
rushed Bush administration attempt at damage control. In 2007, the
controversial architect of the Iraq invasion and later World Bank
President Paul Wolfowitz was engulfed in an ethics scandal over his pay
and promotion package for Shaha Ali Riza. In two short years leading
the institution, Wolfowitz catalyzed the alienation of most divisions
within the bank and the distrust of economics ministries around the
world. Fischer, along with Robert Zoellick and Robert Kimmitt and a
handful of others, was considered as
an emergency replacement while the
administration and stakeholders strategized on how to ease Wolfowitz out
with a minimum of scandal.
In the end, Fischer stayed put in Israel.
It came as a surprise to many when The Wall Street
Journal and Israel's Channel 2 news simultaneously reported in early
December 2013 that the White House was "close to nominating" Fischer to
be appointee Janet Yellen's second-in-command at the U.S. central bank.
Media reports initially indicated that Fischer's
candidacy-to-Senate-confirmation would proceed on greased skids—with no
Senate debate—taking only a week so that the pair could quickly take
over the Fed in January. However, the Senate concluded its 2013
business without taking up the matter. The earliest date the measure
could be put up for a vote is January 6, 2014. Even that date might
slip since Senator Rand Paul and Minority Leader Mitch McConnell plan to
delay the vote unless a long-languishing measure to "Audit
the Fed" is also put up for a vote.
This rushed
approach has meant relatively little reporting on the deeper
implications of having an openly dual Israeli-American citizen a
heartbeat away from Fed chairmanship. That is unfortunate, since Israel
and its U.S. supporters have many hidden reasons for wanting stronger
influence at the Fed that they would likely prefer not to discuss.
That the Fed is a key player in Iran sanctions
implementation is certainly no secret. The Fed has been an equal
partner in levying hundreds of millions in fines against foreign banks
such as R.B.S, Barclays, Standard and Chartered and H.S.B.C. which were
charged with violating the Iran sanctions regime. Although AIPAC never
mentions it, American exporters have been seriously hurt by sanctions on
Iran and the punitive secondary boycott. A coalition representing the
US Chamber of Commerce, the Business Roundtable, Coalition for American
Trade, the National Foreign Trade Council and others urged Congress not
to enact sanctions provisions they estimated would cost
$25 billion and 210,000 American jobs. (PDF) Keeping such a costly
regime in place despite thawing relations and any hard evidence of an
Iranian nuclear weaponization program has therefore required immense
ongoing efforts by Israel lobbying groups.
An equally important target for Fischer and Israel
may be—somewhat ironically given their pro-boycott programs—anti-boycott
activities. In the 1970-80s the Federal Reserve played an active "moral
suasion" role chastising and corralling U.S. banks away from any
activity that Israel construed as compliant with the Arab League
economic boycott. An expert with deep experience enforcing the
international boycott of Iran, Fischer is likely aware of the many
active American grass-roots campaigns aimed at ending the Israeli
occupation of Palestinians through targeted boycotts. These boycotts
range from efforts to get retailers to stop carrying manufactured goods
produced in the occupied West Bank (Ahava and Soda Stream), to
overturning contracts with firms providing services in occupied
territories (Veolia), to academic boycotts and even efforts to get labor
union pensions to divest from Israel bonds. Working more closely with
Israel and AIPAC, the Fed could become a vital node for reinterpreting
and enforcing old or new laws aimed at outlawing and punishing groups
organizing such grass-roots activities by targeting U.S. bank accounts
and freezing their financial flows.
Fischer may also want to launch "exercises" to
prepare the U.S. financial system for the fallout of Israeli military
attacks on Iran. New bills in Congress drafted by AIPAC call not only
for additional sanctions aimed at thwarting a fledgling deal on Iran's
nuclear program (favored 2-to-1 by Americans). AIPAC's bill forces the
U.S. to "have
Israel's back" in the event of a unilateral Israeli strike. If
Israel has already decided to attack Iran, it would benefit immensely
from having Fischer inside the Fed, protecting the financial flows
Israel now regards as all but a birthright from its primary global
underwriter. Less well-known is the Fed's authority to authorize foreign
bank acquisitions. Any future Israeli campaign to further entwine its
banks into the U.S. financial system through acquisitions would likely
find a much more welcoming regulator in Fischer.
Whatever the real
motivation for Fischer's sudden, inexplicably rushed insertion into the
Federal Reserve, it is also worthwhile to note longstanding Fed policies
have correctly considered U.S. citizenship to be preferable for at least
one key position, "because of the special nature of the supervisory
function, the need to ensure confidentiality of information, and the
delegated nature of the function." Unfortunately, that policy
preference covers only Fed
bank examiners rather than top leadership—the
Federal Reserve Act is silent on the wisdom of installing a
revolving door for returning U.S. citizens who took on dual citizenship as a
condition of serving a foreign government.
AIPAC, Fischer's co-author of harmful U.S. economic
policies on behalf of Israel, likely sees the Fischer appointment as an
important test case to assess American tolerance for openly dual
Israeli-American citizens running key U.S. federal agencies. In 2009
former AIPAC research director Martin Indyk, who was at the center of
AIPAC's research division during the FTA push,
said that "the US-Israel Free Trade Agreement served as a wedge that
opened up the Congress to free trade agreements across the world,
including the NAFTA agreement." Likewise, if Fischer can be "wedged"
into the Fed, it begs the question of why former Israeli ambassador to
the U.S. and historian Michael Oren could not someday lead the Near East
division of the State Department. From AIPAC's perspective, having
qualified Israelis directly run key divisions of the U.S. Treasury such
as Terrorism and Financial Intelligence, rather than indirectly through
AIPAC-vetted appointees such as Stuart Levey and his hand-picked
successor David Cohen, could probably boost the volume
of taxpayer give-aways
while improving coordination with Israel. Given AIPAC and Israel's
overly large influence on U.S. military initiatives in the region, the
lobby may now feel the moment is right for appointing Israeli generals
into the Joint Chiefs at the Department of Defense. This, AIPAC may
well reason, would be much more convenient than constantly arranging
visiting Israeli military and intelligence delegations that increasingly
serve as sole briefers (rather than DoD or the American intelligence
community) of members of the US Congress.
Soon after word of his Fed nomination spread,
Fischer again made uncharacteristically harsh statements about Israel at
an NYU Law School forum. As reported in
The Jewish Week, Fischer told the audience that Israel is not
seeking peace "to the extent that it should" and that it is "divided
between those who want to settle the West Bank and those who seek
peace." Fischer—who had every chance to pull U.S. and Israeli financial
levers that could have forced Israel out of occupied territories or
forced compliance with International law—never did. Adding to suspicion
that the statement was simply more empty "lip service" aimed at building
popular support among Americans tired of war, was the reporter of the
quote—former AIPAC lobbyist Douglas Bloomfield. In
1986 Bloomfield was grilled as a key suspect (PDF) in the 1985 FBI
investigation of AIPAC for espionage during the FTA negations
If Americans were ever polled on it—and they never
are—the majority who now object to increasing aid to Israel would also
likely object to quasi-governmental and governmental positions being
staffed by people who—by citizenship or sheer strength of identity
politics—are primarily occupied with advancing Israeli interests rather
than those of the United States. It is obvious that the real reason AIPAC and its economic luminaries such as Fischer never substantiate any
of the advertised benefits the U.S.-Israel "special relationship"
delivers to America in return for all of the costs is simple—there
simply aren't any. As greater numbers of Americans become aware that
the entire "special relationship" framework is sustained by nothing more
than Israel lobby campaign-finance and propaganda networks, the harder
the lobby will have to work to forcibly wedge operatives like Fischer
into positions where they can thwart growing public opposition—whether
it takes the form of boycotts or grassroots opposition to the U.S.
fighting more wars for Israel. In the very short term, Americans can
only fight such undue Israel lobby influence by again—like during the
drive to attack Syria—staging a mass action to demand their senators
reject Stanley Fischer's nomination.
[i] Oberdorfer, Don "Will U.S. Dollars Fix
Israel's Economy?" The Washington Post, June 9 1985
[ii] Oberdorfer, Don "Will U.S. Dollars Fix
Israel's Economy?" The Washington Post, June 9 1985
[iv] Maital, Shlomo "Stanley Fischer: the man
and the plan," The Jerusalem Report,
February 7, 2005
[v] BBC Monitoring Middle East, March 5, 2007
[vii] Williams, Dan "Iran Stepping Up Its
Atomic Efforts" - The Gazette, August
13, 2012
[viii] "Bank of Israel governor: Sanctions
won't collapse Iran economy. Islamic Republic will likely find
way to 'keep economic life going,' says Fischer in interview
with CNBC" The Jerusalem Post, October 24, 2012.
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