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Bernanke wins a second term, but it's a tepid victory

January 29, 2010 |

WASHINGTON — The Senate gave Ben Bernanke a second four-year term as the head of the Federal Reserve on Thursday after critics excoriated the bank's conduct in the years leading up to the financial crisis.

The 70-30 vote was the weakest endorsement ever extended to a chairman in the central bank's 96-year history.

Voting against him were the two Republican senators from Texas, John Cornyn and Kay Bailey Hutchison.

The confirmation was a victory for President Barack Obama, who had called Bernanke an architect of the recovery, but also signaled the extent to which the Fed, once little known to the public, has become the object of outrage over high unemployment and Wall Street bailouts.

In several hours of debate, senators said that the Fed had abetted, then ignored, the housing and credit bubbles and allowed banks to keep dangerously low capital reserves and to make reckless lending decisions that ruined consumers. Some even blamed Bernanke for the falling dollar and questioned his commitment to free enterprise.

In contrast, Bernanke's supporters were muted. They reiterated that the Fed had made mistakes but said that Bernanke had helped save the economy from a far worse recession.

After a week in which top White House officials and Bernanke himself met with Democratic leaders in the Senate to secure support, the Senate first voted 77-23 to end debate, with more than the 60 votes needed to overcome the threat of a filibuster.

On a second vote, to confirm, the 30 dissents came from 18 Republicans, 11 Democrats and one independent, Bernard Sanders of Vermont.

On Thursday evening, Obama congratulated Bernanke in a statement. “As the nation continues to face the consequences of the worst recession in a generation, Ben Bernanke has provided wisdom and steady leadership in the midst of the financial and economic crisis,” he said.

Anger likely to continue

While an arm-twisting campaign by the administration limited the opposition, the outcry against the Fed will most likely continue rippling through policy generally, and Bernanke's leadership in particular. The effects could be felt first in the debate over how to reform financial regulations. The Obama administration has proposed consolidating risk regulation under the Fed, while some in Congress want to strip away its oversight authority.

The vote also made clear Congress' insistence on transparency from a historically secretive institution that has made extraordinary interventions in the market since 2008.

Senators from opposite ends of the spectrum formed alliances. After Sanders, who calls himself a socialist, finished denouncing Bernanke, Sen. Jeff Sessions, a conservative Republican from Alabama, rose to do the same.

To an extent, the rhetoric against Bernanke reflected a spilling-over of frustration at two of his collaborators: the former Treasury secretary, Henry Paulson, and the current one, Timothy Geithner.

Legacy of Greenspan

And looming over it all was the role of Bernanke's predecessor, Alan Greenspan, whose once-sterling reputation has been diminished as his decisions to keep interest rates low after the 2001 recession have been brought into question.

Bernanke, 56, was a member of the Fed's board for part of that period, from 2002 to 2005, when President George W. Bush named him to lead his Council of Economic Advisers. He rejoined the Fed, as chairman, in 2006, and Obama renominated him last year. Bernanke is a Republican economist and an authority on the Great Depression.

“I knew that he would continue the legacy of Alan Greenspan, and I was right,” said Sen. Jim Bunning, R-Ky., who was the lone vote against Bernanke in 2005.

By SEWELL CHAN New York Times


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