Ben Bernanke’s close escape from the Senate Banking Committee sets him up for a record number of final “no” votes on his renomination as Federal Reserve chairman. A second term is still overwhelmingly likely. But such unprecedented disapproval suggests Bernanke will be a 2010 campaign issue. That could make the Fed ever more susceptible to political pressure when it comes to tighten the easy money spigot.
Fed nominations typically glide through committee. When President Jimmy Carter nominated G. William Miller for the post in 1978, the lone dissenting voice was that of gadfly William Proxmire of Wisconsin. He called Miller a joke and said putting him on the Fed would be like sending ballet star Rudolf Nureyev against the heavyweight boxing champ. And despite widespread public blame for the recession in 1981-82 Paul Volcker received just two no committee votes in 1983.
So seven negative votes out of 23 is historically high – nor was it just a few cranky contrarians dissenting. The ranking Republican voted “nay.” So too did Kay Bailey Hutchinson, a soft conservative running in the Texas GOP gubernatorial primary against a hardliner. That’s a strong hint that baseline conservative Republicans plan an anti-Fed platform in midterm elections. And pro-Bernanke votes will be wielded by challengers to incumbents.
So expect many GOPers to abandon Bernanke next month when his job along with a smattering of nervous Democrats facing re-election. Maybe a fifth to a third of the full Senate could vote no, a startling number considering that the high-water mark is 16 final votes against Volcker in 1983. A simple voice vote was enough for Alan Greenspan in 1992 and 2004, and Bernanke himself in 2006.
Congress is already nibbling at Fed independence. An audit of the central bank could even be inserted into financial reforms. There’s also an effort to toss the hawkish regional bank presidents off the group that sets monetary policy. Bernanke’s tepid support in the Senate is another crack in the Fed’s political heat shield. It is also one more reason to question whether the Fed will have the institutional guts to withdraw monetary stimulus when it should, despite stubbornly high unemployment.