US Senate backs Bernanke for second term at Fed
By Mark Felsenthal and Thomas Ferraro
WASHINGTON, Jan 28 (Reuters) – The U.S. Senate on Thursday approved Ben Bernanke’s nomination to a second four-year term running the Federal Reserve, the world’s most powerful central bank, despite deep misgivings over his perceived policy missteps.
The Senate voted 70-30 to confirm Bernanke, after clearing a procedural hurdle with the support of 77 senators.
Bernanke won the Senate’s needed backing despite the stiffest opposition to any nominee for Fed chairman in the nearly 32 years the Senate has voted on the position.
Senators credited Bernanke with steering the U.S. economy through a wrenching financial crisis but leveled withering criticism at him for policies they argued sowed seeds for the turmoil and for an initial slow response.
“Bernanke fiddled while our markets burned,” said Senator Richard Shelby, the top Republican on the Senate Banking Committee.
While Bernanke survived a revolt by lawmakers responding to a surge of public anger at big banks and their regulators, including the Fed, he still faces acute political pressure to ease economic strains.
Democratic Senator Sheldon Whitehouse said it was time to “pivot from the necessary rescue of our major financial institutions to the equally if not more necessary help to Americas families.”
“The Fed has enormous powers that could be used to help people,” he said.
Praised by economists and investors for his unprecedented response to the crisis, Bernanke has endured heavy criticism for failing to see the crisis as it brewed.
President Barack Obama and allies in the Senate Democratic leadership were forced to intervene over the past week to press senators to get the 60 vote super-majority needed to overcome efforts to block the nomination.
“The politically neutral and independent Fed has really been politicized this week, probably to its detriment,” said Chris Krueger of Concept Capital, a private firm that tracks Washington for institutional investors.
EROSION OF SUPPORT
The election last week of a Republican to a Massachusetts U.S. Senate seat long held by Democrats underscored the anger among voters over Wall Street bank bailouts, in part designed by Bernanke, and the weak economy.
The result shocked Washington. A number of senators facing tough re-election battles in November voiced their opposition, raising doubts about whether Bernanke could be confirmed, sending global stock markets lower.
Efforts by Senate Democratic leaders and Obama, who contacted senators over the weekend, helped shore up support for Bernanke.
If confirmed, Bernanke will lead a central bank that has been reshaped by financial crisis, a recession and the shifting politics that ensued.
His biggest task in coming months will be to decide when and how to eventually dismantle or “exit” emergency measures that he helped put in place, without stunting the fragile economic recovery or alarming financial markets.
In another sign of how public outrage over the recession and expensive bank bailouts is dominating Washington before November’s mid-term elections, Treasury Secretary Timothy Geithner was lambasted by lawmakers on Wednesday over the 2008 government bailout of insurer American International Group.
That anger could translate into new moves in Congress to strip the Fed of its direct supervisory power over banks or its responsibility for protecting consumers.
Congress might also mandate much more extensive supervision of the Fed, including its emergency lending and possibly even monetary policy decisions.
In considering Bernanke’s nomination, some lawmakers pressed him to do more for the economy, highlighting the unusually high degree of political pressure now on the Fed.
The Fed guards its independence jealously and is more likely to respond to the political mood by pushing forward on consumer-friendly regulatory initiatives than by steering monetary policy in a direction palatable to lawmakers.
Ethan Siegal of The Washington Exchange — a private firm that tracks Congress and the White House for institutional investors — said he expects Bernanke to steer his own path.
“I think Bernanke is going to be under a lot of pressure from the liberal and populist side of the Congress to keep (interest) rates low and not to withdraw any of the help that the Fed provided the economy,” Siegal said.
“But I think Bernanke is going to do what he thinks is the best thing for the overall economy.”
(Additional reporting by Andy Sullivan; Editing by Neil Stempleman) ((firstname.lastname@example.org; +1 202 898 8329; Reuters Messaging: email@example.com))