Bernanke to be nominated for a second term
Federal Reserve Chairman Ben S. Bernanke, a scholar of the Great Depression who moved boldly last fall to prevent another economic catastrophe, will be nominated by President Obama to a second four-year term as head of the nation’s increasingly powerful central bank, a senior administration official said Monday night.
After months of uncertainty about Bernanke’s fate, Obama is scheduled to announce his decision this morning in an appearance with the Fed chief on Martha’s Vineyard, where the president is vacationing with his family.
Although Bernanke is a Republican who was appointed by former President George W. Bush, he has worked closely with Obama’s economic team, and the president decided to renominate him to maintain continuity as the country appears poised to climb out of the deepest recession in decades, said the official, who spoke on condition of anonymity because the announcement still was pending.
Bernanke’s term expires Jan. 31 and Obama has been noncommittal about whether he would nominate the 55-year-old Princeton University economist for another term. But Obama has praised Bernanke’s response to the financial crisis, which involved aggressive use of the Fed’s emergency powers.
Obama said at a news conference in June that he thought Bernanke had “done a fine job under very difficult circumstances.”
“I think that the Fed probably performed better than most other regulators prior to the crisis taking place, but I think they’d be the first to acknowledge that in dealing with systemic risk and anticipating systemic risk, they didn’t do everything that needed to be done,” Obama said when asked about Bernanke during the June news conference. “I think since the crisis has occurred, Ben Bernanke has performed very well.”
Bernanke has received largely positive reviews from Wall Street as well, and his efforts, along with those of economic officials from the Bush and Obama administrations, are widely credited with preventing a meltdown of the financial system.
Increasing signs that the country’s deep recession may be ending also appear to validate the handling of monetary policy by Bernanke and the Fed, which has dropped its key interest rate to near zero and, using the central bank’s ability to in effect print money, has pumped billions of dollars into the economy to spur lending.
An influential poll of professional economists last month found 80% of them expected Bernanke to be reappointed.
But Obama’s pointed refusal to say whether he would renominate Bernanke had led to speculation that the Fed chief might be replaced.
The focus of the speculation had been Lawrence H. Summers, Obama’s top economic advisor. The same poll of economists, the Blue Chip survey, indicated that Summers was the most likely choice if Bernanke was not renominated.
The senior administration official said Obama wanted to keep in place the government team that has been working to revive the economy.
Summers, Treasury Secretary Timothy F. Geithner and White House Chief of Staff Rahm Emanuel all recommended to Obama that Bernanke be renominated to ensure continuity, the official said. That desire for stability also means that Summers would remain in his role as chairman of the National Economic Council.
“Larry is of course staying, first because no one can do what Larry can as the president’s right-hand advisor on the economy,” the official said, “and because the president wants and needs his whole economic team together.”
The appointment must be confirmed by the Senate.
Although Obama has complimented Bernanke on his handling of the financial crisis, which involved using Fed powers to orchestrate the emergency sale of brokerage Bear Stearns Cos. and to bail out insurer American International Group Inc. last year, some lawmakers from both parties have been critical of his performance. They have complained that the Fed is too secretive about whom it provides money to, and they also have balked at Obama’s plans to increase the Fed’s power to monitor the economy for signs of major systemic risk, part of the administration’s overhaul of financial regulations.
“While I have had serious differences with the Federal Reserve over the past few years, I think reappointing Chairman Bernanke is probably the right choice,” Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) said Monday.
“Chairman Bernanke was too slow to act during the early stages of the foreclosure crisis, but he ultimately demonstrated effective leadership and his reappointment sends the right signal to the markets,” the senator said.
Dodd promised “a thorough and comprehensive confirmation hearing.” But the Democratic-controlled Senate is unlikely to block the appointment.
Bernanke has responded to the criticism, which includes a push by many in Congress for audits of the central bank, by embarking on a public relations blitz unprecedented for a Fed chairman.
Whereas his longtime predecessor, Alan Greenspan, was known for limited and cryptic public statements, Bernanke has been much more open, granting an interview to CBS’ “60 Minutes” and holding a town hall forum in Kansas City, Mo., last month.
Some have likened his outreach to a campaign for reappointment. But Bernanke said he was trying to respond to the intense interest around the country about the Fed and its actions.
“This is an extraordinary time,” Bernanke said in an interview with the Los Angeles Times before the Kansas City event. “It’s important for me to hear from people outside of Washington. And I want to answer the questions that I know people have about the economy, the Fed and the Fed’s actions during this crisis.”
Although he defended the Fed’s actions, Bernanke also has echoed the frustrations of lawmakers and average Americans about the billions of dollars needed to bail out companies such as AIG.
In rare blunt talk for a Fed chairman, he told senators in March that the AIG bailout, which could total $180 billion, made him “more angry” than any other single episode during the recession. But he said the Fed had no choice but to stabilize the company in September or risk a failure that would have been devastating to the global financial system.
Bernanke, who wrote a book of essays on the Great Depression, has said he used the Fed’s emergency powers to prevent a repeat of that disaster.
“I was not going to be the Federal Reserve chairman who presided over the second Great Depression,” he said during the Kansas City event.
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cparsons@latimes.com
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