Obama taps Bernanke for second term
Obama says he will nominate Ben Bernanke to lead Federal Reserve for another 4 years.
(CNN) President Obama announced Tuesday that he plans to nominate Ben Bernanke to a second term as head of the Federal Reserve.
“Ben Bernanke, has led the Fed through the one of the worst financial crises that this nation and this world have ever faced,” Obama said from Martha’s Vineyard, Mass., as Bernanke stood by his side. “As an expert on the causes of the Great Depression, I’m sure Ben never imagined that he would be part of a team responsible for preventing another.”
Obama said that Bernanke’s “background, temperament, his courage, and his creativity” helped him to prevent another Great Depression.
Bernanke, a Republican, has played a central role in the government’s extraordinary response to the recession and 2008 banking panic.
Bernanke will have to be confirmed by the Senate. His term ends on Jan. 31. Fed chairmen serve four-year terms.
The question of Bernanke’s reappointment had been thefocus of much speculation. Recently many economists and insiders had said they believed that he would more than likely keep his job.
The Fed has drawn criticism for not taking a stronger hand earlier in the crisis and for their part in inflating the housing bubble by keeping interest rates low for so long.
“The Federal Reserve like other economic policymakers has been challenged by the unprecedented events of the past few years,” Bernanke said Tuesday. “We have been bold or deliberate as the circumstances demanded, but our objective remains constant to restore a more stable financial, and economic environment in which opportunity can again flourish and Americans’ hard work and creativity can receive their proper rewards.”
The Fed is charged with examining bank soundness, as well as checking the cost and availability of money and credit in the economy. Given the more than $1 trillion the Fed has printed to get the credit markets moving, there’s a renewed focus on watching for signs of inflation.
Over the past three decades, the country has had only three Fed chairmen. New presidents have tended to keep Fed chiefs in place regardless of political party to maintain continuity in monetary policy and confidence in the markets.
Paul Volcker was appointed by President Carter in 1979 and retained by President Reagan. Alan Greenspan, a 1987 Reagan appointee, served under four presidents including President Clinton.
Bernanke, 55, was appointed to the top job in 2006 by President George W. Bush, after serving as Bush’s chair of the Council of Economic Advisers.
An expert on the Great Depression, Bernanke previously chaired the economics department at Princeton University. He also did a three-year stint on the Fed’s board of governors ending in 2005.
On Tuesday, Obama praised the Fed chairman and made it clear he wants him to be a part of the team that strengthens financial regulation to prevent future crises.
“We have already seen how lax enforcement and weak regulation can lead to enormous wealth for a few and enormous pain for everyone else,” Obama said. “And that’s why even though there is some resistance on Wall Street from those who prefer things the way they are, we will pass the reforms necessary to protect consumers, investors, and the entire financial system.”
Obama also said that the expected change ahead would come with “debate and disagreement and resistance from those who prefer the status quo.”
That debate is likely to play out in the Senate, which has bumped heads with Bernanke over the past several months. Bernanke’s confirmation hearing could get tense.
Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, said in a statement Monday night that he supported Bernanke’s nomination as the “right choice,” but he noted that he has had “serious differences” with the Fed under Bernanke’s tenure.
“Chairman Bernanke was too slow to act during the early stages of the foreclosure crisis, but he ultimately demonstrated effective leadership and his reappointment sends the right signal to the markets,” Dodd said in a statement.
Dodd said he expected that lawmakers would raise “many serious questions” about the Fed’s role and authority.