US FEDERAL Reserve chairman Ben Bernanke, who led the biggest expansion of the central bank’s power in its 95-year history to battle the worst economic slump since the Great Depression, has been nominated for a second four-year term by US president Barack Obama.
Mr Obama made the announcement yesterday in Martha’s Vineyard, Massachusetts, where he is on holiday with his family.
Mr Obama appeared with the Fed chairman at his side and praised his handling of the financial crisis of the past year. “Ben approached a financial system on the verge of collapse with calm and wisdom, with bold action and outside-the-box thinking that has helped put the brakes on our economic freefall,” Mr Obama said.
The president also hit back at Mr Bernanke’s critics, defending the central bank chief’s actions – and policies put in place by his own administration – as “steps of necessity, not choice”.
“Taken together, all of these steps have brought our economy back from the brink. They are steps that are working,” Mr Obama said.
Mr Bernanke said: “I will work to the utmost of my abilities to help provide a solid foundation for growth and prosperity in an environment of price stability.”
The decision is the ultimate seal of approval for the Fed chairman, who was appointed by former US president George W Bush and whose reappointment was seen as far from guaranteed.
It follows Mr Bernanke’s aggressive efforts to fight the economic crisis, including radical interest rate cuts, loans to non-bank financial institutions, Fed-led bailouts of AIG and Bear Stearns, and gigantic asset purchases – exploiting the Fed’s powers to their legal limits in an effort to prevent a second Great Depression.
Economists, investors and fellow central bankers overwhelmingly favour Mr Bernanke’s reappointment. However, disquiet in Congress over the exercise of extraordinary Fed powers has raised a cloud over his future.
Mr Bernanke’s nomination requires Senate approval, but his prospects look good after he was endorsed by the head of the banking committee, Christopher Dodd.
Mr Bernanke will still face tough questioning from lawmakers who say he was slow to recognise the severity of the mortgage crisis and did not do enough to protect US consumers while leading bailouts of financial firms.
“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,” Mr Dodd, a Connecticut Democrat, said yesterday. “There will be a thorough and comprehensive confirmation hearing.”
Mr Obama is said to credit Mr Bernanke with a leading role in helping to avert economic catastrophe. The president decided to reappoint Mr Bernanke because he wanted to keep together the team that had weathered the crisis, an administration official said.
The official said US treasury secretary Timothy Geithner, chief of staff Rahm Emanuel and National Economic Council chairman Larry Summers all recommended that Mr Bernanke be reappointed.
“It’s not just that he’s done a great job of dealing creatively with the financial crisis,” said Richard Berner, co-head of global economics at Morgan Stanley in New York.
“He has the capacity to deal with the challenges that lie ahead – continuing to help the economy and markets heal, and engineering the exit strategy when it’s appropriate to do so.” – (Copyright The Financial Times Limited 2009/ Bloomberg)
