28 January 2010
U.S. Senate Confirms Ben Bernanke as Federal Reserve Chairman
Washington — The U.S. Senate confirmed Ben Bernanke January 28 to a second term as chairman of the Federal Reserve, a move likely to reassure world markets that an experienced hand will continue to guide the U.S. central bank and that monetary policy will remain consistent.
“We have had a leader at the Federal Reserve over the last year and a half that has virtually saved our economy from a predictable collapse,” said Senator Chris Dodd, a Connecticut Democrat and chairman of the Senate Banking, Housing and Urban Affairs Committee, in urging his colleagues to approve Bernanke’ s nomination. “To have him walk away and have the Federal Reserve without leadership at this critical moment would be beyond shameful; it would be the height of irresponsibility.”
The Federal Reserve sets interest rates and can inject liquidity into the financial system through direct loans to banks. On January 27, the Fed decided to keep interest rates at record lows.
Senators approved Bernanke in a 70–30 vote, the closest confirmation of a Fed chairman in history. Previously, Paul A. Volcker, who recently has been lauded for his actions during his tenure as Fed chief, had the narrowest margin when he was confirmed to a second term 84–16 in 1983. The Senate never has rejected a nominee to the Fed chairmanship. The economy and the financial system are still in “pretty bad shape,” said Anne Vorce, director of the fiscal policy program at the New America Foundation, a research organization. She said that politicians in recent days have wanted to “go on record and send a signal” with criticism of Bernanke. But she said Bernanke may not be getting enough credit of late. “All things considered, he has done an amazing job. He, along with a number of other people, saved us from a serious depression,” she said.
Republican senators and some Democrats criticized Bernanke for supporting the government bailout of the financial sector, particularly rescuing insurance and financial products company American International Group Inc. and buying mammoth amounts of mortgages. While many economists credit the government moves with preventing a widespread meltdown, senators expressed concern over high unemployment and continuing large bonuses financial companies are awarding to executives on Wall Street.
The Dow Jones industrial average had plunged when Bernanke’ s confirmation appeared in doubt recently, but recovered as it became clear he would eventually be confirmed. “It is true that he has made mistakes, particularly during the bubble years, but it would be extremely difficult to find anyone in a position of real power around the world during that time who was free of error,” writes Douglas J. Elliott, a Brookings Institution fellow, in a recent article. “Changing chairmen at this point would bring real risks, since it would throw into doubt the assumptions of investors and business people about the likely actions of the Fed, which will be so important to the overall performance of the economy. This would not be a good time to encourage investors to sell U.S. assets and the dollar itself or businesses to freeze their investment and hiring plans.”
President George W. Bush initially named Bernanke as Fed chairman, and he was sworn in to his first term on February 1, 2006. Previously, Bernanke was chairman of the White House Council of Economic Advisers in 2005 and 2006, and served on the Federal Reserve Board of Governors from 2002 to 2005. Before that, he was chairman of the Princeton University economics department and had built an academic career specializing in monetary policy and economic cycles.
Indeed, his academic background studying the Great Depression gave comfort when the financial system appeared on the verge of collapse in the fall of 2008. Time magazine named Bernanke “Person of the Year” in 2009, crediting him with rescuing the economy by blasting “trillions of new dollars” into the economy.
“His creative leadership helped ensure that 2009 was a period of weak recovery rather than catastrophic depression, and he still wields unrivaled power over our money, our jobs, our savings and our national future," wrote Time’ s Michael Grunwald. “The decisions he has made, and those he has yet to make, will shape the path of our prosperity, the direction of our politics and our relationship to the world,” Grunwald said.
