Fed’s Bernanke headed for second term

Federal Reserve Chairman Ben Bernanke, widely credited with taking aggressive action to avert an economic catastrophe after
the financial meltdown last fall, will be nominated by President Barack Obama for a second term, The Associated Press learned
last night.
Bernanke masterminded what is now seen as a successful strategy to lift the economy out of recession, unlock
credit and stabilize financial markets in part by using unconventional and unprecedented lending programs.
Many on Wall
Street and in academic circles believed that he would therefore be the best choice to lead the country into a sustainable
recovery and would be in the best position to figure out when and how to reel in the trillions of dollars pumped into the
economy to battle the crisis.
"Wall Street can rest a little easier now," said Chris Rupkey, an economist at
the Bank of Tokyo-Mitsubishi. "Having a new chairman come in at this late date would put the Fed-engineered solution
to both the recovery and the exit strategy at risk."
Obama plans to make the announcement this morning on Martha’s
Vineyard, where he is vacationing for the week with his family. Bernanke is expected to be at his side. A senior administration
official discussed the nomination on the condition of anonymity because it was not yet public.
In remarks prepared for
the announcement, Obama praised Bernanke for leading the country through the meltdown and, with his expertise on the Great
Depression, helping to prevent a crisis rivaling that of the 1930s.
"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
free-fall," Obama said in prepared remarks obtained by the AP.
In sticking with Bernanke, Obama is looking to reassure
the financial sector as well as foreign central banks that his administration has no plans to change course on its largely
well-received approach to rescuing the industry from its meltdown or its management of overall monetary policy.
Bernanke
has won admiration from Democrats and Republicans on Capitol Hill even as some lawmakers have urged him to retain the Fed’s
independence and warned him not to become too cozy with the administration. Any move to replace Bernanke could have been perceived
as injecting politics into the Fed, especially if Obama had turned to Lawrence Summers, his top economic adviser, as Bernanke’s
replacement.
Bernanke, at a Fed conference in Jackson Hole, Wyo., last week, was sanguine about the global economy, saying
it was "beginning to emerge" from the recession and that the worst had been avoided.
For Obama, there was little
political downside in choosing to nominate Bernanke to a second term. The move displays bipartisanship and a steady, unchanging
hand on the economic rudder. With his hands full attempting a health care overhaul, changing the head of the central bank
would have been a distraction Obama could little afford.
"The actions we have taken to stabilize our financial system,
repair our credit markets, restructure auto industry and help the overall economy recover have all been steps of necessity,
not choice," Obama said in prepared remarks for the announcement. "They have faced plenty of critics, some of whom
argued that we should stay the course or do nothing at all. But taken together, all of these steps have brought our economy
back from the brink. They are steps that are working."
Bernanke, 55, was appointed Fed chairman by President George
W. Bush and sworn in Feb. 1, 2006, following Alan Greenspan’s 18-year tenure. His re-nomination to a second four-year term
requires Senate confirmation.
The news drew a tepid – although speedy – response from Sen. Chris Dodd, the Connecticut
Democrat who runs the Banking Committee.
"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," said Dodd, promising a thorough
confirmation hearing. "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."
Bernanke
earned a bachelor’s degree in economics in 1975 from Harvard University and a doctorate in economics in 1979 from The Massachusetts
Institute of Technology. He joined Princeton University as an economics professor in 1985 and was chairman of Princeton’s
Economics Department from 1996-2002.
He had been a chairman of the President’s Council of Economic Advisers and a member
of the Board of Governors of the Federal Reserve System during the Bush administration.