Bernanke reconfirmation

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See also AIG and the reform of the Federal Reserve.


Bernanke confirmed by Senate for second term at Fed

Ben S. Bernanke was confirmed by the U.S. Senate today for a second term as chairman of the Federal Reserve.

The Senate voted 70 to 30 to confirm the 56-year-old former Princeton University professor. Stocks pared losses as the Senate moved closer to a vote.

Bernanke overcame opposition from lawmakers who said he failed to head off the worst financial crisis since the Great Depression and then overstepped his authority by participating in rescues of firms including New York-based insurer American International Group Inc. and Citigroup Inc.

“If you’re the scorekeeper of our recovery, it looks like it can be summarized in the two-word phrase: Banks win,” said Democrat Sheldon Whitehouse of Rhode Island.

Supporters, including some who criticized his record on bank supervision, credited Bernanke with averting a deeper recession by slashing interest rates and pumping $1 trillion into the economy.

“Nobody was more important in preventing the collapse of the financial system and rescuing the economy from what looked like imminent freefall than Chairman Bernanke,” said Senator Charles Schumer, a Democrat from New York.

Rejecting Bernanke would “exacerbate economic uncertainty in an economy that needs confidence and stability, not volatility,” said Senator Robert Menendez, a Democrat from New Jersey.

The Standard & Poor’s 500 index fell 1.2 percent to 1,084.53 at 4:06 p.m. after Qualcomm Inc. lowered its sales forecast and speculation mounted Greece won’t be able to finance its debt. The index tumbled as much as 1.7 percent earlier.

  • Vote tally for the Bernanke reconfirmation, New York Times

Bernanke gains backers as Reid sets procedural vote

"Federal Reserve Chairman Ben S. Bernanke juggled an interest-rate meeting with phone calls to senators as he rolled up more support for a confirmation vote Majority Leader Harry Reid said may take place Jan. 28 or 29.

“He has the votes to be confirmed,” Senator Judd Gregg, a New Hampshire Republican, told reporters in Washington. “He is the right guy for the job.” Late today, Reid moved to limit debate and prevent senators from blocking a vote on confirmation. A procedural vote was set for Jan. 28.

Senator Amy Klobuchar, a Minnesota Democrat, said she spoke with Bernanke today and would vote yes. Republican Bob Corker of Tennessee, who had been leaning in Bernanke’s favor, also spoke with the Fed chief and said he would back him unless “something drops out of the skies.”

Forty-nine senators have said they would vote for the 56- year-old Fed chief or were inclined to support him, while 20 were opposed. Republicans were split 13-13 on a second term for Bernanke, while Democrats favored the Fed chief by a 35-6 margin, according to a count by Bloomberg News. Thirty-one senators were undecided or declined to comment.

Reid late today set a vote for Jan. 28 on whether to limit debate on Bernanke’s nomination. The motion to end debate requires 60 votes and would clear the way for confirmation, which requires a majority of senators present and voting. Vice President Joseph Biden could break a tie if necessary.

McConnell says he expects Bernanke to win new term

Senate Republican leader Mitch McConnell said he expects Federal Reserve Chairman Ben S. Bernanke will win a second term, indicating enough Republicans will join Democrats in backing the central banker.

“He’s going to have bipartisan support in the Senate, and I would anticipate he will be confirmed,” McConnell, a Kentucky Republican, said today on NBC’s “Meet the Press.” McConnell, 67, declined to say how he would vote.

Assurances during the past two days from Republican and Democratic lawmakers and White House officials have eased concerns about Bernanke’s confirmation, and online traders today put near-certain odds on approval. On Jan. 22, the two top Senate Democrats had signaled they were undecided, while other Democrats announced their opposition.

“I think we’ve dodged the bullet on this one,” said Greg Valliere, chief policy strategist at Potomac Research Group in Washington. “If the markets sold off on Friday because of Bernanke, I think the markets will be relieved Monday morning.”

The Standard & Poor’s 500 Index dropped 2.2 percent on Jan. 22 to 1091.76, reversing gains so far in 2010.

Traders on Intrade, a Web exchange for futures contracts based on political outcomes, today saw a 93 percent chance Bernanke would be confirmed, up from 88 percent yesterday. The contract traded as low as 65 percent on Jan. 22 before starting to rebound after Senate Majority Leader Harry Reid announced his support.

Bernanke’s term expires Jan. 31. President Barack Obama announced the renomination in August. A Senate vote hasn’t been scheduled.

Bernanke’s critics, including some who support him for a second term, have said the Fed failed to regulate banks before the credit crisis and questioned its involvement in the $182 billion bailout of New York-based insurer American International Group Inc.

Reid says he’ll back Bernanke for second Fed term

Senate Majority Leader Harry Reid backed Federal Reserve Chairman Ben S. Bernanke for a second term, helping the White House shore up support in the face of several Democratic defections 10 days before his term expires.

“I will continue to impress upon Chairman Bernanke that his most important job as America’s central banker is to give families and businesses the peace of mind that their economy is working for them,” Reid, a Nevada Democrat, said in a statement late today.

Stocks extended losses after Reid’s support for Bernanke wavered earlier in the day and two other Democrats who face re- election this year, Barbara Boxer of California and Russ Feingold of Wisconsin, said they will oppose the 56-year-old former Princeton economist.

Bernanke has drawn fire from some lawmakers for lax regulation of banks prior to the financial crisis and for bailouts of firms such as American International Group Inc. The Democratic party’s loss of a seat in Massachusetts this week has added to pressure on those senators facing re-election at a time of rising voter anger over the economy.

“You have this populist surge out there that’s been intensified and reinforced by the Massachusetts election,” said Norm Ornstein, a political scientist at the American Enterprise Institute in Washington, who said Bernanke is still likely to be confirmed.

‘Worst Signal’

Christopher Dodd, the Senate Banking Committee chairman who proposes stripping the Fed of banking supervision authority, renewed his support for the Fed chief today. He said rejecting him would send the “worst signal to the markets right now” and produce an economic “tailspin.”

“This is the most important central banker in the world,” said Dodd, a Democrat from Connecticut.

The Standard & Poor’s 500 Index fell 2.2 percent to 1,091.74 at 4:05 p.m. in New York. Treasury two-year note yields fell 4 basis points to 0.79 percent, and are down 8 basis points since Jan. 15.

“Bernanke is viewed by markets around the world as a positive for the U.S. economy and the uncertainty about his reconfirmation is accelerating today’s sell-off,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York.

Traders at Intrade, a Web exchange for futures contracts based on political outcomes, see a 75 percent chance Bernanke will be reconfirmed, down from 93 percent yesterday. The contract traded as low as 65 percent today before rebounding after Reid announced his intention to support Bernanke.

Shoring Up Support

Obama, who nominated Bernanke for a second term in August, sought to shore up support for the Fed Chairman as his four-year term drew to a close without a scheduled confirmation vote.

“The president has a great deal of confidence in what Chairman Bernanke did to bring our economy back from the brink,” Deputy Press Secretary Bill Burton told reporters traveling with Obama to an event in Ohio. Obama “continues to think he’s the best person for the job and will be confirmed” by the Senate.

Treasury Secretary Timothy Geithner and White House Chief of Staff Rahm Emanuel made calls to Democratic senators to press for Bernanke’s confirmation, according to administration officials, who spoke on condition of anonymity. Republican Senator Judd Gregg of New Hampshire, a member of the Banking Committee, lobbied Republicans, the officials said.

Greenspan Endorsement

Bernanke, picked for his first term that started in 2006 by President George W. Bush, got the endorsement of his predecessor, Alan Greenspan, a fellow Republican. Greenspan called him “far and away the best person to lead the Fed” in an e-mailed statement.

Late in the afternoon, senators were leaning toward support for Bernanke. Twenty-five said they would vote for Bernanke, while 16 were opposed or leaning against him and 27 were undecided.

Senate Finance Committee Chairman Max Baucus, a Democrat, and Gregg a member of the banking committee, said there’s enough support for Bernanke to secure his Senate confirmation. His term ends on Jan. 31.

The Banking Committee voted 16-to-7 on Dec. 17 to recommend Bernanke’s nomination to the full Senate, with 12 Democrats and four Republicans in favor. Six Republicans and one Democrat, Jeff Merkley of Oregon, were opposed.

Dodd’s Reminder

Dodd reminded Republicans today that they initially named Bernanke to his post -- and that rejecting his nomination would amount to replacing him with a Democratic pick.

“Remember this was George Bush’s choice as well,” Dodd told reporters. “Do they want to have the president make his choice for the chairman of the Federal Reserve? Do the Republicans really want that? That would be rather interesting to see.”

Bernanke has supporters and detractors in both parties. Democratic supporters include Indiana’s Evan Bayh, Rhode Island’s Jack Reed and New York’s Charles Schumer. Among his Republican backers are George Voinovich of Ohio and Mike Johanns of Nebraska.

Among the opponents are Democrats such as Byron Dorgan of North Dakota and Republicans Jeff Sessions of Alabama and James Inhofe of Oklahoma. Senator Richard Durbin of Illinois, the Majority Whip, is undecided about the Bernanke confirmation vote, his spokesman said.

The Fed chief will probably need 60 votes in the Senate to break procedural holds from at least four lawmakers. Baucus, a Democrat from Montana, said that while Bernanke is likely to be confirmed, he didn’t know when the vote would take place. Bernanke’s term ends Jan. 31.

Massachusetts Election

The loss in the Massachusetts election this week to fill the seat left vacant by the late Senator Edward M. Kennedy has shaken Democrats, making it harder for party leaders to rally support for Bernanke, said Ornstein.

Dodd faced a difficult re-election bid before his decision to retire because of favorable home loans he received and his ties to the financial industry that he has built as chairman of the Senate Banking Committee.

Dodd saw his popularity wane after reports in 2008 that he received discounts on home loans from Countrywide Financial Corp., now part of Bank of America Corp. He has said he was unaware that he was receiving preferential treatment and was cleared in August by the Senate Ethics Committee.

Nevada Poll

Reid faces re-election this fall in his home state of Nevada, where a Public Policy Polling survey conducted Jan. 11- 12 showed him trailing two possible Republican opponents by at least eight percentage points.

Boxer, in a statement, said she won’t support Bernanke because “our next Federal Reserve Chairman must represent a clean break from the failed policies of the past.”

Feingold blamed the Fed under Bernanke for lax supervision of financial firms. “Under Chairman Bernanke’s watch, predatory mortgage lending flourished, and ‘too big to fail’ financial giants were permitted to engage in activities that put our nation’s economy at risk,” he said in a statement.

Senate Majority Leader Harry Reid said he was undecided on whether to back Ben S. Bernanke for a second term as chairman of the Federal Reserve, even as President Barack Obama expressed confidence he will win Senate approval.

“For right now, yes he is” undecided on whether to vote for confirmation, Jim Manley, a spokesman for the Nevada Democrat, said in an e-mail. Obama “continues to think he’s the best person for the job and will be confirmed,” Deputy Press Secretary Bill Burton told reporters traveling with Obama in Ohio.

Democrats Barbara Boxer of California and Russ Feingold of Wisconsin, both facing re-election this year, said today in Washington they’ll oppose Bernanke, whose term ends at the end of the month. Senate Finance Committee Chairman Max Baucus, a Democrat, and Judd Gregg, a Republican member of the banking committee, said there’s enough support for Bernanke to secure his Senate confirmation.

Bernanke, while navigating the economy through the worst slump since the Great Depression, has drawn fire from lawmakers for lax regulation prior to the financial crisis and for putting taxpayer dollars at risk through the rescues of Bear Stearns Cos. and American International Group Inc.Christopher Dodd, chairman of the Senate Banking Committee, renewed his support for the Fed chief today.

Rejecting Bernanke would send the “worst signal to the markets right now” and produce an economic “tailspin,” Dodd, a Democrat from Connecticut, told reporters. “This is the most important central banker in the world.”

U.S. stocks fell, extending the biggest weekly drop since October, as financial shares slumped for a second day on President Barack Obama’s plan to rein in banks and results at Google Inc. disappointed investors. The Standard & Poor’s 500 Index was down 1 percent to 1,105.49 at 2:10 p.m. in New York.

The Banking Committee voted 16-to-7 on Dec. 17 to recommend Bernanke’s nomination to the full Senate, with 12 Democrats and four Republicans in favor. Six Republicans and one Democrat, Jeff Merkley of Oregon, were opposed.

Dodd reminded Republicans today that they initially named Bernanke to his post -- and that rejecting his nomination would amount to replacing him with a Democratic pick.

“Remember this was George Bush’s choice as well,” Dodd told reporters today. “Do they want to have the president make his choice for the chairman of the Federal Reserve? Do the Republicans really want that? That would be rather interesting to see.”

The Fed chief will probably need 60 votes in the Senate to break procedural holds from at least four lawmakers. Baucus, a Democrat from Montana, said that while Bernanke is likely to be confirmed, the vote may not come before his term expires at the end of the month.

“I can’t give you a date, but clearly he will get confirmed,” Baucus, a Democrat from Montana, said. Asked if Bernanke’s confirmation is in trouble, Baucus said, “No.”

The loss in the Massachusetts election this week to fill the seat left vacant by the late Senator Edward M. Kennedy has shaken Democrats, making it harder for party leaders to rally support for Bernanke, said Norm Ornstein, a political scientist at the American Enterprise Institute in Washington.

“It’s more than procedural now because you have this populist surge out there that’s been intensified and reinforced by the Massachusetts election,” he said. “It doesn’t kill the Bernanke reconfirmation but it means for Reid to get to 60 is going to take a greater effort.”

Dorgan Opposition

Senator Byron Dorgan, a North Dakota Democrat who is retiring this year, said he will oppose Bernanke because the Fed chief rebuffed Dorgan’s request to identify firms that received loans from the Fed during the financial crisis.

“I just think that’s unacceptable,” Dorgan said. “I don’t think his nomination should come up until he provides the information that’s requested.”

The Fed is appealing a federal judge’s August decision in a lawsuit filed by Bloomberg LP, the parent of Bloomberg News, to release names of firms that received central bank loans.

Traders at Intrade, a Web exchange for futures contracts based on political outcomes, see an 80 percent chance Bernanke will be reconfirmed, down from 93 percent yesterday. The contract has traded as high as 85 percent today. The bid- ask spread on contracts is currently 6.1 percentage points, indicating uncertainty about the odds of reconfirmation.

A failure to confirm Bernanke “would really rattle the market,” said Karl Mills, who helps manage about $30 million as chief investment officer for Jurika Mills & Keifer LLC in Oakland, California. “The Fed chair you know is better than the one you don’t. In this political environment, we’re not presuming anything anymore.”

Under Senate rules, a motion to limit debate on Bernanke’s nomination would set up a procedural vote after two legislative days to curtail additional debate to 30 hours. Bernanke’s supporters need 60 votes to limit debate and clear the way for a final vote on whether to confirm him for another term.

Dodd and Senator Richard Shelby of Alabama, the panel’s senior Republican, have said the Fed failed to adequately supervise banks. Dodd has also said Bernanke deserved “substantial credit” for helping avert “utter economic catastrophe.”

“It is time for a change -- it is time for Main Street to have a champion at the Fed,” Boxer said today in a statement. “Our next Federal Reserve Chairman must represent a clean break from the failed policies of the past.”

The Fed chairman has increased government backstops to banks and other firms and used the Fed’s balance sheet to revive credit, including through the purchase of $1.25 trillion in mortgage-backed securities.

“Under Chairman Bernanke’s watch, predatory mortgage lending flourished, and ‘too big to fail’ financial giants were permitted to engage in activities that put our nation’s economy at risk,” Feingold said in a statement.

Opposition to Bernanke confirmation growing

HuffPost's Jeff Muskus and I polled as many senators as we could find Thursday after posting this story.The question: Have they decided how they'll vote on the nomination of Federal Reserve Chairman Ben Bernanke for a second term?

We found 26 senators in all. Half were undecided; one wouldn't say; three were outright nays; only nine were firmly in the aye column.

Sen. Barbara Mikulski (D-Md.) summed it for many of her colleagues. The decision, she said, "gives me heartburn."

Along with Mikulski, eight other Democratic senators said they are undecided, including Maria Cantwell (Wash.), Ben Cardin (Md.), Patrick Leahy (Vt.), Carl Levin (Mich.), Amy Klobuchar (Minn.), Bill Nelson (Fla.), Bob Casey (Pa.), Barbara Boxer (D-Calif.) and Debbie Stabenow (Mich.).

Sen. Jay Rockefeller (D-W.V.) declined to say which way he would vote or whether he's made up his mind.

Republican Sens. Kit Bond (Mo.), John McCain (Ariz.) and Olympia Snowe (Maine) also said they are undecided.

The nine yes votes: Democrats Tom Carper (Del.), Kent Conrad (N.D.), Daniel Inouye (Hawaii), Paul Kirk (Mass.) and Mark Warner (Va.), plus Republicans Susan Collins (Maine), George Voinovich (Ohio) and Lindsey Graham (S.C.), along with independent Joe Lieberman (I-Conn.) all said they'd vote to confirm Bernanke.

The undecideds cited Bernanke's role in the financial collapse. "Usually at this stage of a vote like that, you have a better sense about it. I'm clearly and definitively undecided," said Casey. "Part of it is just how we analyze his stewardship at the time when our economy began to go in the wrong direction."

Sen. Byron Dorgan (D-N.D.) said he's voting no unless Bernanke tells Congress "who got direct loans from the Fed," he said. "He's essentially said to us he doesn't intend to tell the congress or the American people which investment banks got direct loans from the Fed for the first time in history."

Sen. David Vitter (R-La.), who opposes Bernanke, said he thinks Democrats might sacrifice him him to distance themselves from the White House. "I do think more people -- Democrats, in particular -- are looking for separation from the administration on votes, so that could be a factor," Vitter said.

Sen. Bob Corker (R-Tenn.), a leading Republican on financial issues, said that while he backed Bernanke in committee, he is reserving judgment for the floor, but leaning toward support. "I talked to Ben this morning," said Corker. "I've shared with him, I think this AIG situation has certainly created some issues....You'd have to be sort of not alive to realize, no doubt, this AIG situation certainly has been damaging to the Fed."

McCain, who has said he believes that his presidential campaign was undone in large part by the financial meltdown, cited it as a reason to pause. "I do think the case is being made that his policies were a major contributor to the meltdown," he said.

Stabenow said much the same. "I certainly have question about his role in what got us to the point where we had the financial collapse," she said.

Sen. Richard Shelby (R-Ala.) has made up his mind and is firmly opposed. "I was a Fed defender for 22 years -- probably one of the biggest ones on the banking committee," he said. "Once I got into the weeds on the Fed's role as a regulator dealing with the holding companies, their regulatory regime, and their record was weak and flawed and that is my beef right now."

Feingold to oppose Bernanke as doubts grow over vote count

"Sen. Russ Feingold (D-Wis.) on Friday morning pledged to vote against Ben Bernanke's nomination to head the Federal Reserve Board for a second term.

Feingold’s announcement comes amid questions about whether Bernanke has the votes to win confirmation in the Senate. He was easily approved in a 16-7 Senate Banking Committee vote in December.

The chairman has come under criticism from lawmakers in both parties on a range of issues, from the Fed’s efforts to save AIG to the transparency of its books.

Bernanke has taken heat as Wall Street’s profits have soared while unemployment has become stuck in double digits, and the wave of economic populism soaring through Washington in the wake of a stunning Democratic loss in the Massachusetts Senate races comes at a bad time for his confirmation. Bernanke was named Time magazine’s Person of the Year in December for his handling of the financial crisis. He was nominated to a second four-year term by President Barack Obama in August, and his first term ends at the end of January.

Senate Majority Leader Harry Reid (D-Nev.) has not scheduled a confirmation vote on Bernanke’s nomination, and the Senate is running out of legislative days before the end of January. Reid on Thursday asked Bernanke to provide him with more information on what the Fed is doing to increase lending by banks.

If Bernanke is not confirmed by the end of the month, the Fed’s vice chairman would temporarily take over.

Sens. Bernie Sanders (I-Vt.), Jim Bunning (R-Ky.), Jim DeMint (R-S.C.) and David Vitter (R-La.) have holds on Bernanke's nomination. Most analysts predict Bernanke has enough votes for confirmation, but they expect the vote to be one of the most contentious ever for a Fed chairman.

Feingold blames Bernanke and the Fed for ushering in the economic recession.

“Under the watch of Ben Bernanke, the Federal Reserve permitted grossly irresponsible financial activities that led to the worst financial crisis since the Great Depression,” he said in a statement.

He blames Bernanke for the flourishing of predatory mortgage lending and activities by banks that Feingold said put the country’s economy at risk.

He also said the Fed under Bernanke’s leadership has resisted efforts to review how taxpayer money was used to handle the crisis.

“When the full Senate considers his nomination, I will vote against another term for Chairman Bernanke,” Feingold concluded."

Merkley statement on nomination of Bernanke

"WASHINGTON, DC – Oregon’s Senator Jeff Merkley, a member of the Senate Committee on Banking, Housing and Urban Affairs, issued the following statement on his intention to vote against Ben Bernanke’s nomination to a second term as Chairman of the Board of Governors of the Federal Reserve System:

“Tomorrow, I will vote against confirming Ben Bernanke as Chairman of the Federal Reserve. The reason, in short, is that as Chairman, Dr. Bernanke failed to recognize or remedy the factors that paved the road to this dark and difficult recession. Following our economic collapse, it is also apparent that he has not changed his overall approach to prioritizing Wall Street over American families.

“My decision is based on my fundamental belief that our economy cannot recover if we do not put Main Street first.

“Our nation is just beginning to emerge from the greatest financial crisis since the Great Depression, and there is no guarantee we will continue on the road to recovery over the long or short terms. Unemployment remains far too high, credit is unavailable to too many businesses, and families are plagued by falling home prices and high foreclosure rates. Even as we move forward with our efforts to get our economy back on track, it is critical we carefully examine what led us to this point.

“For too many years, federal regulators turned a blind eye to signs of an impending financial crisis. Tricks and traps proliferated in the credit card and consumer lending industries. Predatory mortgage loans exploded, fueling an unsustainable housing bubble. Regulators lifted rules requiring banks to keep adequate capital, and a laissez-faire approach to securitization, derivatives, and proprietary trading encouraged excessive risk-taking on Wall Street. As a member of the Board of Governors, Chair of the Council of Economic Advisers, and then ultimately as Chairman of the Board of Governors, Dr. Bernanke supported each of these decisions, failing to take the necessary precautionary steps that could have averted or mitigated financial collapse.

“These failures are very relevant to the future. We need economic leaders who understand that the ultimate goal of economic policies and the key to meaningful economic recovery should be financially successful families, not oversized Wall Street profits.

“Indeed, it should be recognized that although Wall Street prospered in the short-term from reduced leverage requirements, securitization of faulty mortgages, and the explosion of derivatives, Americans did not. The expansion that occurred from 2002 to 2007 became the first economic expansion in which working families were worse off at the end than at the beginning. This is not a path that we can afford to travel again.”

Ben Bernanke's term running out as Senate Dems try to set a vote

"Senate Democrats will try to reach an agreement in the next two weeks to hold a vote on Ben Bernanke's confirmation to a second term as Federal Reserve chairman.

Bernanke, whose term is up Jan. 31, will face a contentious confirmation vote for Fed chairman. Several senators, including Bernie Sanders (I-Vt.), Jim Bunning (R-Ky.) and Jim DeMint (R-S.C.), have placed holds on the vote.

Senate Majority Leader Harry Reid (D-Nev.) is working on an agreement to bring the vote up on the floor amid the already packed calendar, but a vote has yet to be scheduled, an aide said.

An aide to Sanders said he did not know of any meetings so far between Reid and the senator to reach an agreement on when to allow normal debate to proceed. If Reid is unable to reach an agreement with Sanders and the Republicans senators who have placed holds, he would need to file for cloture.

Most analysts expect Bernanke to be confirmed, but a cloture process requiring 60 votes would underscore the political heat enveloping the Federal Reserve.

"It would be extraordinary, but I don't know that it means much more than we know," said Doug Elliott, of the Brookings Institution. "I think he'll probably be voted in 3 to 1 or at least 2 to 1. If you've got 40 votes against him, that would be more of a message."

Reid has yet to say he will file for cloture, and an aide said that he would continue to pursue an agreement.

The Fed has come under extreme pressure on Capitol Hill for the extraordinary steps it took to support the financial industry in the last two years. The House passed legislation in December that would allow government audits of the central bank's monetary policy. The Fed has been criticized by both liberals and conservatives.

"It's always going to be scary to the markets if they think there is a weak Fed chairman," Elliott said.

Separately, the Senate Banking Committee will continue to hash out financial regulatory overhaul legislation. Committee Chairman Chris Dodd (D-Conn.) and ranking member Richard Shelby (R-Ala.) are working on a compromise behind the scenes.

The thorniest aspect remains the creation of a new Consumer Financial Protection Agency (CFPA) that would have power over credit cards and home loans, among other issues. The agency has strong support from most Democrats and consumer groups, but is fiercely opposed by Republicans and the financial industry.

Aides and industry sources said that one option under discussion would be to create instead a consumer protection division of a new bank regulator. There remains significant debate about such a division's capacity for rulemaking and enforcement. But the lack of a separate agency could ease tensions.

And an agreement on the CFPA could begin paving the way for a bipartisan bill that would have much easier chances for final passage.

Bernanke fights to justify his need to stay close to Wall Street

Federal Reserve Chairman Ben S. Bernanke told senators a proposal to strip the central bank of its authority to supervise banks could harm its ability to conduct monetary policy and provide emergency aid to lenders.

The Fed’s role as supervisor provides information that helps officials decide when to change interest rates, the central bank said in an 11-page paper that makes the case to retain its examination powers. The document and a cover letter from Bernanke were sent yesterday to members of the Senate Banking Committee and released by the Fed today.

Christopher Dodd, the panel’s chairman, proposes stripping the Fed of those duties, calling its performance before the financial crisis an “abysmal failure.” Bernanke and the Obama administration are opposed. In his cover letter, Bernanke said the document shows how the Fed’s oversight role helps it “better perform its critical functions as a central bank.”

The Fed said in the paper that it is “seriously engaged” in efforts to correct “significant shortcomings” in oversight of banks whose risky investments were blamed in part for sparking the crisis.

“Elimination of the Federal Reserve’s role in supervision would severely undermine the Federal Reserve’s ability to obtain in a timely way and to evaluate the information it needs to conduct its central banking functions effectively,” the paper said.

Bank Collateral

Such information helps the Fed “assess independently and rapidly” the conditions of banks and the collateral they pledge when borrowing from the Fed’s discount window. In addition, getting data from another agency, even if employees were “willing and able to help,” could slow the Fed’s decision- making process, the central bank said.

In the cover letter addressed to Dodd and ranking Republican Richard Shelby of Alabama, Bernanke said some senators had asked for the Fed’s views on its role in supervision and regulation.

The paper discusses how the Fed’s expertise and information in setting monetary policy “enable it to make a unique contribution to an effective regulatory regime, especially in the context of a more systemic approach to consolidated oversight,” Bernanke said.

The document in part reflects public statements from Bernanke and other officials in recent months, responding to lawmakers’ criticism of the central bank for lax oversight on banks and subprime mortgages.

Managing Risks

Regulators failed to insist financial firms manage risks effectively, the Fed said. The central bank said it’s “engaged in an intensive self-examination of its supervisory functions” aimed at addressing weaknesses and improving oversight of individual firms and the broader system. The Fed cited steps such as starting “enhanced quantitative surveillance” of large banks.

The Fed tied supervisory information to monetary policy, saying the decisions to exit from close-to-zero interest rates and the record expansion of credit “will require particularly careful assessments of developments at financial institutions and in financial markets, and their resulting implications for the real economy.”

“Information from the supervisory process will help policy makers to assess overall credit conditions and the stability of the financial sector, and so to time appropriately the shift to reduced policy accommodation,” the paper said.

Vote counts for the Bernanke renomination

Senate floor vote (not scheduled)

Bernanke count: 25 senators support, 13 oppose

Twenty-five senators have publicly supported Ben Bernanke for another term as Federal Reserve chairman while 13 are opposed, according to a survey conducted by The Hill.

The survey suggests that after a rocky Thursday, Bernanke's nomination picked up steam on Friday. An ABC News report on Thursday night that raised doubts about Bernanke's confirmation triggered panic on Wall Street Friday.

Bernanke appears to be on his way to be confirmed, but it's far from a done deal. Bernanke attracted 16 yes votes in the Banking Committee and 7 nos. Since then, Bernanke has picked up nine public endorsements and six nos. Several senators have holds on Bernanke's nomination, which will require 60 votes to overcome.

Twenty-five senators voted against the 2008 Wall Street rescue package that was pushed by Bernanke. Of the 23 who are still in the Senate, 10 are opposed to Bernanke and three (Sens. Tim Johnson (D-S.D.), Mary Landrieu (D-La.) and Jon Tester (D-Mont.)) have publicly supported him. The others are undecided or did not return phone calls to The Hill.

Sens. Barbara Boxer (D-Calif.) and Kay Bailey Hutchison (R-Texas), who backed the 2008 financial rescue measure, oppose Bernanke's nomination. Sen. Jeff Merkley (D-Ore.), who also opposes Bernanke's nomination, was not in the upper chamber when the bailout passed.

Of the 25 who back Bernanke, 17 are Democrats and eight are Republicans. Of the 13 who oppose him, eight are Republicans, along with four Democrats and one independent.

A run down of the senators' positions on Bernanke follows.

(Note: Senators who backed Bernanke in the Banking Committee are in the yes column. However, a few -- -- including Sen. Sherrod Brown (D-Ohio) -- could change their vote on the floor. Brown voted yes in the Banking panel, but left his options open on his floor vote. Senators not listed are undecided or did not comment.)

YES (26 from WSJ count)

  • Chris Dodd (D-Conn.)
  • Tim Johnson (D-S.D.)
  • Jack Reed (D-R.I.)
  • Charles Schumer (D-N.Y.)
  • Evan Bayh (D-Ind.)
  • Bob Menendez (D-N.J.)
  • Daniel Akaka (D-Hawaii)
  • Sherrod Brown (D-Ohio)
  • Jon Tester (D-Mont.)
  • Herb Kohl (D-Wis.)
  • Mark Warner (D-Va.)
  • Michael Bennet (D-Colo.)
  • Bob Bennett (R-Utah)
  • Bob Corker (R-Tenn.)
  • Mike Johanns (R-Neb.)
  • Judd Gregg (R-N.H.)
  • Lamar Alexander (R-Tenn.)
  • Richard Burr (R-N.C.)
  • Richard Lugar (R-Ind.)
  • Susan Collins (R-Maine)
  • Harry Reid (D-Nev.)
  • Mary Landrieu (D-La.)
  • Jeff Bingaman (D-N.M.)
  • Tom Carper (D-Del.)
  • Max Baucus (D-Mont.)
  • Richard J. Durbin (D-IL)
  • George V. Voinovich (R-OH)
  • Orrin Hatch (R-UT)
  • Joseph I. Lieberman (ID-CT)

NO (15 from WSJ count)

  • Jeff Merkley (D-Ore.)
  • Richard Shelby (R-Ala.)
  • Jim Bunning (R-Ky.)
  • Mike Crapo (R-Idaho)
  • David Vitter (R-La.)
  • Kay Bailey Hutchison (R-Texas)
  • Jim DeMint (R-S.C.)
  • Bernard Sanders (I-Vt.)
  • Jim Inhofe (R-Okla.)
  • Jeff Sessions (R-Ala.)
  • Russ Feingold (D-Wis.)
  • Byron Dorgan (D-N.D.)
  • Barbara Boxer (D-Calif.)
  • John McCain (R-AZ)
  • Jon Kyl, (R-AZ)

Senate Banking Committee vote, Dec 17, 2009

Yes - 16, No - 7


  • Christopher Dodd, Chairman, Connecticut Yes
  • Tim Johnson, South Dakota Yes
  • Jack Reed, Rhode Island Yes
  • Chuck Schumer, New York Yes
  • Evan Bayh, Indiana Yes
  • Robert Menendez, New Jersey Yes
  • Daniel Akaka, Hawaii Yes
  • Sherrod Brown, Ohio Yes (soft may change on the floor)
  • Jon Tester, Montana Yes
  • Mark Warner, Virginia - Yes
  • Jeff Merkley, Oregon - No
  • Herb Kohl, Wisconsin Yes
  • Michael Bennet, Colorado Yes


  • Richard Shelby, Ranking Member, Alabama No
  • Bob Bennett, Utah Yes
  • Jim Bunning, Kentucky No
  • Mike Crapo, Idaho No
  • Bob Corker, Tennessee Yes (soft may change on the floor)
  • Jim DeMint, South Carolina - No
  • David Vitter, Louisiana - No
  • Mike Johanns, Nebraska Yes
  • Kay Bailey Hutchison, Texas - No
  • Judd Gregg, New Hampshire - Yes

Thursday, December 17, 2009 , 09:30 AM, 538 Dirksen Senate Office Building, room 538

The Committee will meet in EXECUTIVE SESSION to VOTE on the nominations of The Honorable Ben S. Bernanke, of New Jersey, to be Chairman of the Board of Governors of the Federal Reserve System; Mr. Eric L. Hirschhorn, of Maryland, to be Under Secretary of Commerce for Export Administration; Ms. Marisa Lago, of New York, to be an Assistant Secretary of the Treasury; and Mr. Steven L. Jacques, of Kansas, to be an Assistant Secretary of Housing and Urban Development.

Ben Bernanke is widely expected to win Senate approval for a second term as Federal Reserve chairman, but opponents are hoping to use the debate on his nomination to curtail his autonomy at the central bank.

The Senate Banking Committee is poised to clear Mr. Bernanke's nomination on Thursday, sending it to the full Senate for a vote. Several lawmakers plan to use the proceedings to gain momentum for a bill that aims to subject the Fed's monetary-policy making to congressional audits.

The measure, crafted by Sen. Bernie Sanders (I., Vt.), mirrors one written by Rep. Ron Paul (R., Texas) that was included in the House's overhaul of financial-industry regulations passed last week.

Republican Sens. Jim DeMint of South Carolina and David Vitter of Louisiana have vowed to block Mr. Bernanke's confirmation until the full Senate considers the audit legislation, which has been co-sponsored by about a third of the Senate.

Mr. DeMint said Tuesday that he thinks the measure, which has steadily gained support among lawmakers, would pass if it came to a full Senate vote.

"It would surprise me if very many people would be willing, in public, to vote against the audit," Mr. DeMint said. "Americans don't trust the Federal Reserve," he said. It has expanded its "mission well beyond anything that was ever discussed."

The top Republican on the Banking Committee, Sen. Richard Shelby of Alabama, declined to disclose whether he will back Mr. Bernanke for another term. But he said he would "absolutely" support the audit provision.

"I'm for an independent Fed on monetary policy," Mr. Shelby said, "but they should have nothing to hide."

Mr. Bernanke has fought the audit bill for months, contending that it would constitute a congressional takeover of monetary policy. Most of the Fed's other operations, such as bank supervision and consumer protection, are already subject to audits by the Government Accountability Office, an arm of Congress.

Monetary-policy deliberations, such as interest-rate decisions and related actions, have been excluded from audits since 1978 to prevent political interference at the Fed.

Mr. Bernanke was first appointed by former President George W. Bush and was nominated for a second four-year term by President Barack Obama.

In opposing the movement to audit the Fed, Mr. Bernanke has the backing of some senior lawmakers and numerous academic economists.

Sen. Judd Gregg (R., N.H.), among the Fed's fiercest defenders on Capitol Hill, has vowed to fight the audit legislation. He noted that the measure has not attracted the level of support in the Senate that it has in the House, where two-thirds of lawmakers co-sponsored the provision.

House lawmakers who support broader auditing of the Fed are engaging in "rampant pandering populism," Mr. Gregg said. "I don't think the Senate is at that point. I think there's a much more logical and thoughtful approach over here. And people recognize that having Congress involved in monetary policy is a disastrous idea."

But the audit legislation has drawn backers from across the political spectrum, including Mr. Sanders -- among the most liberal lawmakers in Washington -- and conservatives such as Messrs. Paul and DeMint.

Grassroots activists from the left and the right are lobbying lawmakers intensely to keep the audit provision alive.

On Tuesday, 17 organizations ranging from the liberal consumer group Public Citizen to the conservative activist group FreedomWorks asked Senate Banking Committee members to delay the panel's vote on the nomination until Mr. Bernanke's record receives further discussion and the audit legislation gets a stand-alone vote in the full Senate.

"We simply cannot go through the worst financial crisis in generations and rubber stamp the nomination of the chairman who was at the helm when the ship hit the iceberg," they wrote.

In 2006, the Senate confirmed Mr. Bernanke for the Fed job by a voice vote. The last time a nominee for Fed chairman drew substantial opposition was in 1983, when 16 senators voted against giving Paul Volcker a second term after he raised interest rates to double digits to thwart inflation.

"Holds" placed on Bernanke reconfirmation

"...Bernanke, whose term is up Jan. 31, will face a contentious confirmation vote for Fed chairman. Several senators, including Bernie Sanders (I-Vt.), Jim Bunning (R-Ky.) and Jim DeMint (R-S.C.), have placed holds on the vote..."

"Senate Banking Committee Chairman Chris Dodd said today that Ben Bernanke cannot remain as chairman of the Federal Reserve if the Senate does not confirm him by January 31 when his four-year term expires. In an interview on CNBC, Dodd said Fed Vice Chairman Donald Kohn would take over as chairman. Sen. Judd Gregg (R., N.H.) made the same point. The comments generated some confusion on Wall Street, but the situation isn’t clear-cut.

This much is clear: A Fed chairman cannot automatically stay in his position after his four-year term as chairman expires. Members of the Fed board, in contrast, can remain in office as governors until their expired term has been filled. The Federal Reserve Act says that the Fed vice chairman acts as chair in the “absence” of the chairman. But “absence” is not defined.

The Fed has twice faced circumstances in which a chairman has not been confirmed by the Senate by the time his term expired. But in both those cases, the Fed did not have a vice chairman in place so the members of the Federal Reserve Board elected the chairman as chairman pro tempore. In 1948, Marriner Eccles served as chairman pro tempore from February 3 until April 15, when Thomas McCabe was sworn in as chairman. And in 1996, Alan Greenspan served as chairman pro tempore from March 3 to June 20, when he was confirmed by the Senate for a third term as chairman.

Bernanke’s 14-year term as a governor — one of seven positions on the Federal Reserve Board — runs through 2020. What would stop the Fed board from electing Bernanke as chairman pro tempore if he’s not confirmed by February 1? That’s not clear.

The Fed and Sen. Dodd hope the confirmation vote will come soon after the Senate reconvenes on January 19. But at least four senators have placed holds on the nomination, forcing Senate Majority Leader Harry Reid to schedule a floor debate about Bernanke, invoke cloture on the nomination and prepare for an up-or-down vote. At the moment Bernanke seems to have the 60 votes he’d need to be confirmed. But if the Senate delays a full vote past January 31, the Fed’s Board could be forced to make a decision to avert worry on Wall Street.

UPDATE: Former Fed governor Larry Meyer of Macroeconomic Advisers points out that even if Bernanke had to step aside for Kohn as chairman of the Fed board, he could remain as chairman of the central bank’s Federal Open Market Committee. The chairman of the FOMC, which sets interest rates, is elected to a one-year term by the committee’s members at the group’s first regular meeting of the year (January 26-27). When nominations are taken at that meeting, the chairman of the board by custom is the only one nominated. So Bernanke could remain as FOMC chairman even if Kohn had to be nominated as chairman of the Federal Reserve Board. (This wouldn’t eliminate investors’ concerns entirely, but could limit some worries about the direction of interest-rate policy in the event of a bureaucratic delay.)

Sanders puts a "hold" on Bernanke confirmation

"Senator Bernard Sanders of Vermont said on Wednesday that he would try to block the Senate from confirming Ben S. Bernanke to a second term as chairman of the Federal Reserve.

The move is unlikely to derail Mr. Bernanke’s reappointment, but it could slow the confirmation process and give the Fed’s critics additional opportunity to press their case. As a practical matter, it means Senate Democratic leaders will have to line up 60 votes in favor of Mr. Bernanke rather than a simple majority at a time when the Federal Reserve is under increasing populist attacks from lawmakers on both the right and the left.

Mr. Bernanke will testify on Thursday at his confirmation hearing before the Senate banking committee. He is expected to face criticism for not doing more to prevent the financial crisis, and calls by some lawmakers for a sharply reduced regulatory role in the future.

Mr. Sanders, an independent, is not a member of the Senate banking committee, but he has frequently accused the Federal Reserve of bailing out Wall Street firms and the banking industry at the expense of ordinary citizens.

“In this country, there is profound disgust at what happened on Wall Street,” Mr. Sanders said in a telephone interview. “People want a new direction and people are asking, where was the Fed? How did the Fed allow this to happen, when one of their mandates to oversee the safety and soundness of the banking system?”

Mr. Sanders said he would place a hold on Mr. Bernanke’s nomination when it reached the Senate floor. Under Senate rules, lawmakers would need to amass 60 votes to override Mr. Sanders and proceed with a vote on the nomination.

Though the Senate has been paralyzed by similar blocking tactics on countless other issues, Mr. Bernanke probably has enough support in both parties to clear the 60-vote hurdle.

The Fed chairman was originally appointed by President George W. Bush and took over the central bank in February 2006. Despite his Republican ties, Mr. Bernanke forged a close working relationship with President Obama and his top economic advisers during the financial crisis.

Mr. Bernanke’s four-year term as Fed chairman ends on Jan. 31, 2010. If he were not reconfirmed by then, he could continue to serve in an acting role until he was confirmed or someone else was confirmed to succeed him. His supporters include much of the Senate’s Democratic leadership, though some senior Democrats have been more grudging than others.

Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, has said Mr. Bernanke was “probably” the best person to lead the Fed because he responded valiantly to the financial crisis when it began two years ago.

But Mr. Dodd has also proposed stripping the Federal Reserve of virtually all its powers as a banking regulator, and consolidating all the federal government’s bank regulatory efforts in a new agency. In an Op-Ed article last Sunday in The Washington Post, Mr. Bernanke sharply criticized Mr. Dodd’s proposal.

Senator Richard C. Shelby of Alabama, the top Republican on the Senate banking committee, has also been sharply critical of the Federal Reserve but has not yet said how he will vote on Mr. Bernanke’s nomination.

Mr. Sanders, one of the Senate’s most left-leaning lawmakers, had already said he would vote against Mr. Bernanke’s appointment. He has also sponsored a bill that would allow Congress to “audit” all of the Federal Reserve’s activities, including its core mission of steering the economy by setting interest rates.

Mr. Sanders’s bill is identical to one championed by Representative Ron Paul, Republican of Texas, which Mr. Bernanke and other top Fed officials have adamantly opposed on the grounds that it would undermine the central bank’s political independence.

But in a surprising setback to the Fed, the House Financial Services Committee voted last month to approve Mr. Paul’s bill as an amendment to a broader bill aimed at overhauling financial regulation."

Paul and Grayson ask for postponement of Bernanke confirmation

Full text: Read the letter calling for the delay

In a letter they will send to Senate Banking Committee Chairman Christopher Dodd this afternoon, Rep. Ron Paul (R., Tex.) and Alan Grayson (D., Fla.) will ask that the Senate hold off on Federal Reserve Chairman Ben Bernanke's confirmation hearing until the central bank releases more information about its rescues.

It is up to the Senate and not the House to confirm the Fed chairman, and the congressmen's letter might not carry much weight in the neighboring chamber. Still, it is a sign of the potentially hostile environment Mr. Bernanke could face when he returns to Congress in the weeks ahead to defend his policies in confirmation hearings. Mr. Paul has won broad support in the House for a bill that would subject the Fed to audits by Congress's Government Accountability Office.

The lawmakers offer a long list of disclosure demands, including a call for more information on which financial firms have received emergency Fed loans in the past year and transcripts of Federal Open Market Committee meetings up to June 2009. Transcripts are released with a five year league. The Fed has resisted calls for information about firms receiving its loans for fear it will stigmatize them in markets and make them and others reluctant to turn to the central bank in a time of crisis.

Both congressmen have been sharp critics of the Fed.

"We are writing to ask you postpone the confirmation of Ben Bernanke until the Federal Reserve releases documentation that will allow the public and the Senate to have a full understanding of the commitments that the Federal Reserve has made on our behalf," the letter says. Senate confirmation hearings haven't been scheduled yet.

The Fed declined to comment.

21% favor Bernanke’s reappointment

"Ben Bernanke begins the formal process tomorrow for confirmation to a second term as chairman of the Federal Reserve Board, but 41% of Americans think President Obama should name someone new to the post.

A new Rasmussen Reports national telephone survey finds that only 21% of adults believe the president should reappoint Bernanke to another four-year term. But a sizable 39% aren’t sure what the president should do.

In July, Americans were more closely divided over Bernanke’s reappointment: 26% thought it was a good idea, while 33% felt the president should name someone new. Even then, however, 41% were undecided.

Republicans are more strongly opposed to Bernanke’s reappointment than Democrats and adults not affiliated with either of the major parties. However, investors support a second term for Bernanke by more than two-to-one over non-investors.

These findings come as a number of Rasmussen Reports’ regular economic indexes show downturns in confidence.

Bernanke’s favorables continue to fall. Only 21% have at least a somewhat favorable view of the Fed chairman now, while 38% regard him unfavorably. His critics feel more strongly since 15% have a very unfavorable opinion of Bernanke, compared to three percent (3%) with a very favorable view. Forty percent (40%) don’t know enough about him to even venture a soft opinion, though.

Thirty-two percent (32%) still had a favorable view of Bernanke in June, a number that had held roughly steady since the Wall Street meltdown last fall. But his favorables fell six points to 26% in July.

Largely unchanged from the previous survey is the view Americans have of Bernanke in comparison to his predecessor as Fed chairman, Alan Greenspan. Seventeen percent (17%) say Bernanke has done a better job, but 44% think Greenspan was the better chairman. Thirty-nine percent (39%) are not sure.

Forty-one percent (41%) say the chairman of the Federal Reserve Board has too much power over the economy, but that’s down five points from 46% in June. Only seven percent (7%) say the Fed chairman doesn’t have enough power, while 29% say his level of power over the economy is about right. Twenty-two percent (22%) aren’t sure.

Senate Banking Committee hearing Dec 3

Source: Reconfirmation Hearing replay video Senate Banking Committee Thursday, December 3, 2009, 10:00 AM, 106 Dirksen Senate Office Building

The committee will meet in OPEN SESSION to conduct a hearing on the nomination of The Honorable Ben S. Bernanke to be Chairman of the Board of Governors of the Federal Reserve System.

"Under fire from Democrats and Republicans alike, Ben S. Bernanke defended his record Thursday as chairman of the Federal Reserve but admitted that the central bank’s own lapses contributed to the financial crisis.

“I did not anticipate a crisis of this magnitude,” Mr. Bernanke acknowledged in an occasionally contentious hearing on his nomination for a second term as Fed chairman.

Mr. Bernanke volunteered that the Fed had been “slow” in protecting consumers from high-risk mortgages during the housing bubble and that it should have forced banks to hold more capital for all the risks they were taking on.

“In the area where we had responsibility, the bank holding companies, we should have done more,” he told lawmakers. “That is a mistake we won’t make again.”

As he faced the Senate Banking Committee on Thursday, Mr. Bernanke still seemed to have enough support to win Senate approval for a second term.

But he and the Fed came under withering criticism from some lawmakers for failing to recognize the crisis until it was too late and then bailing out financial giants like Citigroup and the [AIG|American International Group].

“In the face of rising home prices and risky mortgage underwriting, the Fed failed to act,” said Senator Richard Shelby of Alabama, the senior Republican on the banking committee. “The Fed chose not to use its rule-making authority over mortgages to arrest risky lending and underwriting practices.”

“Many of the Fed’s responses, in my view, greatly amplified the problem of moral hazard stemming from too big to fail treatment of large financial institutions and activities.”

Mr. Shelby said he had lost much of his confidence and trust in the Fed, and made it clear he had not yet decided whether he will support Mr. Bernanke for a second four-year term.

Mr. Bernanke and the Fed were already under fire from populist wings of both the Democratic and Republican parties.

On Tuesday evening, Senator Bernard Sanders of Vermont declared that he would try to block Mr. Bernanke’s approval on the Senate floor by placing a “hold” on his nomination. Senate leaders would need 60 votes, rather than a simple majority, to override the hold.

Senator Jim Bunning, a Kentucky Republican who was the only person to vote against Mr. Bernanke’s original appointment as Fed chairman in 2006, vowed to “do everything I can to stop your nomination and drag this out as long as I can.”

Mr. Bernanke did not flinch. While acknowledging that the Federal Reserve had made mistakes, he assert that the massive rescue operations put in place by the Fed, the Treasury and by Congress had prevented the financial crisis from being “markedly worse” than it was.

“Taken together, the Federal Reserve’s actions have contributed substantially to the significant improvement in financial conditions and to what now appear to be the beginnings of a turnaround in both the U.S. and foreign economies,” Mr. Bernanke said in his written remarks.

The Fed chairman also highlighted the central bank’s efforts to tighten financial regulation in many areas, from tougher rules against subprime mortgages and credit card fees to tougher capital requirements and new proposals to regulate executive compensation at banks.

“A financial crisis of the severity we have experienced must prompt financial institutions and regulators alike to undertake unsparing self-assessments of their past performance,” Mr. Bernanke acknowledged.

“At the Federal Reserve, we have been actively engaged in identifying and implementing improvements in our regulation and supervision of financial firms,” he said.

Mr. Bernanke appeared to have the support of most Democrats on the banking committee, including its chairman, Senator Christopher J. Dodd of Connecticut. Mr. Dodd praised Mr. Bernanke’s response to the financial crisis and forcefully endorsed him for a second term, but he argued that the power to regulate financial institutions should be turned over to a new and separate regulatory agency.

“Under your leadership, Mr. Chairman, the Federal Reserve has taken extraordinary actions to right the economy,” Mr. Dodd told Mr. Bernanke. “I believe that you deserve another term as chairman of the Federal Reserve, and I intend to vote for your nomination.”

Mr. Bernanke, a Republican, was appointed to his first term as Fed chairman by President George W. Bush. But he has forged a closing working relationship during the financial crisis with President Barack Obama, who nominated him for a second four-year term.

If critics like Mr. Sanders and Mr. Bunning follow through on their pledges to block Mr. Bernanke’s nomination, Senate leaders will need to come up with 60 votes override their “holds.”

But unlike so many of the partisan battles that have often paralyzed the Senate, because Democrats hold 60 votes, Mr. Bernanke has enough support in both parties to clear that hurdle eventually.

Mr. Bernanke’s term as Fed chairman expires on Jan. 31, 2010. But even if the Senate does not confirm him or some other candidate by that date, Mr. Bernanke would still hold his seat as a Fed governor and would be allowed to remain an acting Fed chairman until a successor was confirmed."

In an op-ed that appeared in Sunday’s Washington Post, the chairman of the Federal Reserve, Ben Bernanke, defended the Federal Reserve’s existing bank supervision powers, expressing “concern[] … that a number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions.”

The Congressional actions to which Chairman Bernanke refer include a Senate proposal that would strip the Federal Reserve of its bank regulatory powers and a vote in the House Financial Services Committee to repeal existing Federal Reserve exemptions from Government Accountability Office audits, which, in the Chairman’s view, were intended to protect monetary policy from short-term political pressure.

Chairman Bernanke explained that, because of the Federal Reserve’s role in making monetary policy, it “brings unparalleled economic and financial expertise to its oversight of banks, as demonstrated by the success of the stress tests.”

With respect to the GAO audit exemption, Chairman Bernanke indicated that its repeal “would serve only to increase the perceived influence of Congress on monetary policy decisions, which would undermine the confidence the public and the markets have in the Fed to act in the long-term economic interest of the nation.”

Wall Street Journal editorial board against reconfirmation

The politicians turn on a political central banker.

The White House said yesterday it has damped down a political revolt against Ben Bernanke and now has the votes to secure the Federal Reserve Chairman's second four-year term. Whether or not Mr. Bernanke is confirmed, the lesson we draw is that overly political central bankers will eventually be undone by politics.

There's no doubt that some of this reconfirmation panic is nothing but political opportunism. When we opposed Mr. Bernanke's reconfirmation on December 3, the facile consensus was that the Fed chief was a master of the universe who had saved the world from depression. But after Scott Brown's victory in Massachusetts last week, Senate Democrats are suddenly looking for a financial political sacrifice. President Obama doesn't look ready to throw over Treasury Secretary Tim Geithner, so Mr. Bernanke is the designated spear catcher.

The Democrats' loudest complaint, moreover, is that Mr. Bernanke and the Fed haven't been easy enough in printing money. Majority Leader Harry Reid declared his support for Mr. Bernanke on Friday, but not before extracting what he said were concessions about future Fed policy.

The Fed chief promised, said Mr. Reid, that he would "redouble his efforts" to make credit available and that Mr. Bernanke "has assured me that he will soon outline plans for making that happen, and I eagerly await them."

Redouble? The Fed has already kept interest rates at near zero for more than a year, and it is buying $1.25 trillion in mortgage-backed securities to refloat the housing bubble, among other interventions into fiscal policy and credit allocation. Is the Fed going to buy another $1.25 trillion, or promise to keep rates at zero for another 14 months?

Mr. Reid's declaration of a confirmation quid pro quo will not reassure global investors who already fear that the Fed lacks the political will to withdraw its historic post-crisis liquidity binge soon enough to avoid new asset bubbles.

Our own view is that Mr. Bernanke is already far too susceptible to political pressure. As a Fed governor, he was Alan Greenspan's intellectual co-pilot last decade when their easy money policies created the housing mania. When Congress later put political pressure on the Fed to direct credit toward housing, and even to student loans, Mr. Bernanke (who was then chairman) also quickly obliged.

More ominously for the next four years, Mr. Bernanke continues to deny any Fed monetary culpability for creating the mania. Shortly after the New Year, even with his nomination pending, Mr. Bernanke issued an apologia that was striking for its willingness to play to the Congressional theory of the meltdown by blaming bankers and lax regulators. We won't rehearse our decade-long monetary argument with Mr. Bernanke today—see "Bernanke at the Creation," June 23, 2009. But the chairman's refusal to acknowledge any mistakes is one reason the dollar is so weak in global capital markets. Investors are hedging their bets in commodities and nondollar assets.

Yes, much of Wall Street wants to see Mr. Bernanke confirmed. The Street is currently making a bundle off Fed policy, as it borrows at near-zero rates and lends long, and the banks don't want that to end. The banks also loved negative real interest rates in the middle of the last decade, and we know how that turned out. Wall Street always loves easy money—until inflation returns, or the bubbles pop.

Others argue that any alternative to Mr. Bernanke could be worse, and that is certainly a risk. Mr. Geithner and White House economic adviser Larry Summers couldn't be confirmed, even in a Democratic Senate. In the short term if Mr. Bernanke is defeated, Vice Chairman Donald Kohn might run the Open Market Committee, and he shares Mr. Bernanke's contempt for Fed critics. President Obama could also select San Francisco Fed President Janet Yellen, but she thinks the Fed should be even easier.

Still, we can think of current or former presidents of regional Fed banks who have hard money credentials. They would also not carry the baggage of whatever Harry Reid extracted as a price of confirmation.

We agree that the Fed needed to ease money precipitously when the financial markets suffered their heart attack in late 2008, and we praised Mr. Bernanke for that at the time and since. But the issue for the next four years is whether the Fed can extricate itself from its historic interventions before it creates a new round of boom and bust. We already see signs that it has waited too long to move.

The Fed as an institution is also under political attack in a way that it hasn't been since the early 1980s, and that was when Paul Volcker was being excoriated for being too tight. That criticism has rarely if ever been leveled at Mr. Bernanke. The next Fed chairman is going to need the market credibility, and the political support, to raise interest rates when much of Congress and Wall Street will be telling him to stay at zero. That is the real reason to oppose a second term for Chairman Bernanke.


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