Bernanke Clears Senate Hurdle for Confirmation as Fed Chief
January 28, 2010, 04:48 PM EST
By Craig Torres and Joshua Zumbrun
Jan. 28 (Bloomberg) -- The U.S. Senate cleared the way for the confirmation of Ben S. Bernanke to a second term as chairman of the Federal Reserve.
The Senate voted 77 to 23 today to limit debate on his nomination.
Bernanke overcame opposition from lawmakers who said he failed to head off the worst financial crisis since the Great Depression and then overstepped his authority by participating in rescues of firms including New York-based insurer American International Group Inc. and Citigroup Inc.
“If you’re the scorekeeper of our recovery, it looks like it can be summarized in the two-word phrase: Banks win,” said Democrat Sheldon Whitehouse of Rhode Island.
Supporters, including some who criticized his record on bank supervision, credited Bernanke with averting a deeper recession by slashing interest rates and pumping $1 trillion into the economy.
“Nobody was more important in preventing the collapse of the financial system and rescuing the economy from what looked like imminent freefall than Chairman Bernanke,” said Senator Charles Schumer, a Democrat from New York.
Rejecting Bernanke would “exacerbate economic uncertainty in an economy that needs confidence and stability, not volatility,” said Senator Robert Menendez, a Democrat from New Jersey.
During a second term, the former Princeton University economics professor would need to head off efforts by lawmakers to lift a ban on congressional audits of monetary policy and strip the Fed of bank supervisory powers, said J. Alfred Broaddus Jr., former president of the Richmond Fed.
Monetary Expansion
Bernanke, 56, would also need to begin reversing a record monetary expansion without undercutting the economic recovery, Broaddus said.
“If he moves prematurely, the risk is that the recovery, already pretty fragile, becomes damaged,” Broaddus said. “If he waits too long, the risk is that inflation expectations could build so you have an inflation problem all of a sudden.”
Bernanke has increased government backstops to banks and other firms and used the Fed’s balance sheet to revive credit, including through the purchase of $1.25 trillion in mortgage- backed securities.
The Fed will begin exiting the emergency programs this quarter, winding down a balance sheet that has grown to $2.23 trillion from $880 billion two years ago.
Lending Programs
Bernanke and his fellow policy makers yesterday affirmed their plan to shut down backstop lending programs next month and to end the purchase of mortgage bonds in March. They also repeated a pledge to keep interest rates near zero for an “extended period.”
“I don’t think anybody has faced as big of a challenge as this FOMC faces in the next four years,” said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey.
“They are going to face continued pressure” on Fed independence, he said. “There are risks all along the way. There are considerable political threats.”
Benchmark Rate
Draft legislation in the Senate would strip the Fed of bank oversight authority and consolidate supervision in a single agency. Last month, the House approved a proposal by Representative Ron Paul, a Texas Republican, to end a ban on government audits of monetary policy.
Schumer today criticized efforts to curb the Fed’s independence, saying: “If you don’t like monetary policy when the Fed does it just wait until the politicians get their hands on it.”
Lawmakers have also stepped up inquiries about the Fed’s oversight of New York-based insurer AIG following the central bank’s rescue of the firm. Bernanke sought this month to defuse allegations that the central bank tried to conceal details about the $182.3 billion bailout, inviting the Government Accountability Office to audit the Fed’s involvement and extensions of credit to the insurer.
“From monetary policy to regulation, consumer protection, transparency and independence, Chairman Bernanke’s time as Fed chairman has been a failure,” said Senator Jim Bunning, a Republican from Kentucky.
January 28, 2010, 04:48 PM EST
By Craig Torres and Joshua Zumbrun
Jan. 28 (Bloomberg) -- The U.S. Senate cleared the way for the confirmation of Ben S. Bernanke to a second term as chairman of the Federal Reserve.
The Senate voted 77 to 23 today to limit debate on his nomination.
Bernanke overcame opposition from lawmakers who said he failed to head off the worst financial crisis since the Great Depression and then overstepped his authority by participating in rescues of firms including New York-based insurer American International Group Inc. and Citigroup Inc.
“If you’re the scorekeeper of our recovery, it looks like it can be summarized in the two-word phrase: Banks win,” said Democrat Sheldon Whitehouse of Rhode Island.
Supporters, including some who criticized his record on bank supervision, credited Bernanke with averting a deeper recession by slashing interest rates and pumping $1 trillion into the economy.
“Nobody was more important in preventing the collapse of the financial system and rescuing the economy from what looked like imminent freefall than Chairman Bernanke,” said Senator Charles Schumer, a Democrat from New York.
Rejecting Bernanke would “exacerbate economic uncertainty in an economy that needs confidence and stability, not volatility,” said Senator Robert Menendez, a Democrat from New Jersey.
During a second term, the former Princeton University economics professor would need to head off efforts by lawmakers to lift a ban on congressional audits of monetary policy and strip the Fed of bank supervisory powers, said J. Alfred Broaddus Jr., former president of the Richmond Fed.
Monetary Expansion
Bernanke, 56, would also need to begin reversing a record monetary expansion without undercutting the economic recovery, Broaddus said.
“If he moves prematurely, the risk is that the recovery, already pretty fragile, becomes damaged,” Broaddus said. “If he waits too long, the risk is that inflation expectations could build so you have an inflation problem all of a sudden.”
Bernanke has increased government backstops to banks and other firms and used the Fed’s balance sheet to revive credit, including through the purchase of $1.25 trillion in mortgage- backed securities.
The Fed will begin exiting the emergency programs this quarter, winding down a balance sheet that has grown to $2.23 trillion from $880 billion two years ago.
Lending Programs
Bernanke and his fellow policy makers yesterday affirmed their plan to shut down backstop lending programs next month and to end the purchase of mortgage bonds in March. They also repeated a pledge to keep interest rates near zero for an “extended period.”
“I don’t think anybody has faced as big of a challenge as this FOMC faces in the next four years,” said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey.
“They are going to face continued pressure” on Fed independence, he said. “There are risks all along the way. There are considerable political threats.”
Benchmark Rate
Draft legislation in the Senate would strip the Fed of bank oversight authority and consolidate supervision in a single agency. Last month, the House approved a proposal by Representative Ron Paul, a Texas Republican, to end a ban on government audits of monetary policy.
Schumer today criticized efforts to curb the Fed’s independence, saying: “If you don’t like monetary policy when the Fed does it just wait until the politicians get their hands on it.”
Lawmakers have also stepped up inquiries about the Fed’s oversight of New York-based insurer AIG following the central bank’s rescue of the firm. Bernanke sought this month to defuse allegations that the central bank tried to conceal details about the $182.3 billion bailout, inviting the Government Accountability Office to audit the Fed’s involvement and extensions of credit to the insurer.
“From monetary policy to regulation, consumer protection, transparency and independence, Chairman Bernanke’s time as Fed chairman has been a failure,” said Senator Jim Bunning, a Republican from Kentucky.
