http://news.excite.com/news/r/010308/14/bush-fisher

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Fed's "repo man" Fisher to join Treasury

Updated 2:22 PM ET March 8, 2001

By Marjorie Olster

NEW YORK, (Reuters) - For the past six years, Peter Fisher has served as the Federal Reserve's point man on Wall Street, guarding the stability of financial markets and overseeing implementation of interest rate and foreign exchange policies.

And now he's taking that market know-how to Washington.

The White House said Thursday President Bush will nominate Fisher, the New York Fed's executive vice president in charge of markets, as undersecretary of the Treasury Department for domestic finance.

Since October 1994, Fisher has headed the bank's open market desk which buys or sells U.S. debt securities almost daily to fine tune the money supply and keep the interest rate on overnight bank lending close to the target set by the Federal Open Market Committee (FOMC) in Washington.

He is known affectionately on Wall Street as the Fed's "repo man" because of the regular repurchase, or "repo" operations his desk conducts.

As the government went from running budget deficits to surpluses, Fisher managed the practical aspects of the government's one-year-old debt reduction program which entailed buying back bonds and cutting down on new issuance.

HEADING TO THE OTHER SIDE

In his new job, he will be on the other side of that trade, setting government debt management policy and passing orders to his successor on the open market desk.

Wall Street economists hope Fisher's depth of experience would help the new administration clarify its debt management policies after comments last week by Treasury Secretary Paul O'Neill sent confusing signals to the markets on whether the administration would continue to buy back debt.

"Certainly having someone with Peter Fisher's depth of experience is going to be helpful," said Lou Crandall, an economist at Wall Street research firm Wrightson Associates who closely follows the Fed and the money market.

Crandall said the whole issue of debt reduction was so sensitive, it was a virtual minefield for any politician who discusses it publicly.

The Bond Market Association enthusiastically welcomed Fisher's nomination.

"Peter Fisher brings a thorough and substantive knowledge of the important role the fixed income market plays in maintaining economic stability," it said.

CREATIVE THINKER

Those who know Fisher, 44, say he is progressive and forward-thinking in his management style and not shy about new ideas or new technology.

"The open market desk took a much more creative approach to challenges under Fisher," Crandall said. "He is not someone who backs down from challenges."

As head of the open market desk, Fisher also managed foreign exchange trading operations at the direction of Treasury. He oversaw occasional U.S. interventions in currency markets to buy or sell dollars, either on the Treasury's own account or on behalf of foreign central banks.

He attended the FOMC meetings in Washington where the Fed sets interest rates.

A graduate of Harvard law school, Fisher has been on the front line of the New York Fed's monitoring of financial markets and large, money-center banks for any signs of distress that could lead to a systemic banking crisis or a credit crunch either domestically or globally.

He was closely involved in the New York's Fed's engineering of a $3.6 billion bailout by private creditors of hedge fund Long Term Capital Management in 1998 and was one of the first to learn of the fund's problems. The Fed twisted the creditors' arms to come up with a private-sector rescue because the crisis threatened the global economy.

His innovative streak was evident, colleagues say, in the New York Fed's new liquidity measures introduced ahead of the transition to year 2000 as insurance policy against any catastrophic computer failure due to the so-called Y2K bug or a run on banks.

Under those measures, the Fed flooded the banking system with liquidity, partly by expanding the types of collateral it accepted for repurchase operations.

Y2K turned out to be no panic but the special liquidity measures kept confidence in the banking system high and contributed to a sense of calm in the markets around the turn of the century.

-- (M@rket.trends), March 13, 2001

Answers

A good article about the steps the Fed took in 1999 is at

http://hv.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001nPd

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"Fed's Y2K liquidity measures keep markets calm"

-- (M@rket.trends), March 13, 2001.