Critics vocal as Senate hands Bernanke a 2d term
WASHINGTON - Federal Reserve chairman Ben Bernanke won confirmation for a second term yesterday, but only by the closest vote ever for the crucial post and after withering criticism from US lawmakers for bailing out Wall Street while ordinary Americans suffered during the recession.
The Senate confirmed Bernanke for a four-year term by a 70 to 30 vote, a margin 14 votes narrower than the closest previous vote for a Fed chairman.
The Senate battle over Bernanke’s confirmation has been a test of central bank independence, a crucial element if the Fed is to carry out unpopular but economically essential policies. Its decisions on interest rates can have immense consequences, affecting the success or failure of the largest companies, the typical home buyer’s ability to get an affordable loan, and the price of cereal at the grocery store.
Created by Congress in 1913 after a series of bank panics, the Federal Reserve is an independent agency, supposedly removed from politics, but its chairman is often assailed by lawmakers and others when the economy falls.
“Bernanke fiddled while our markets burned,’’ huffed Richard Shelby, the top Republican on the Senate Banking Committee, during yesterday’s debate. “Ben Bernanke’s Federal Reserve played a key role in setting the stage for the financial crisis.’’
Shelby and other opponents blame Bernanke for failing to spot problems leading up to the crisis, for lax bank regulation, and for not cracking down on dubious home mortgage practices. All those missteps contributed to the recession, they contend.
But supporters see it far differently.
“The chairmanship of Ben Bernanke has in no small measure made it possible for this nation to avoid a catastrophe,’’ said Senator Christopher Dodd, the Connecticut Democrat who chairs the Senate Banking Committee.
Senator Chuck Schumer, a Democrat and Bernanke supporter, worried that the bitter fight over the nomination would send “the message that the Federal Reserve and its monetary policy decisions are under the thumb of Congress. Businesses will be faced with the prospect that the Fed might not be able to do what’s necessary for the economy because of pressure from Congress.’’
The confirmation vote came at nearly the last possible moment - Bernanke’s current term expires Sunday.
The closest previous final confirmation vote for a Fed chairman was 84-16 for Paul Volcker’s second term in 1983, following another severe recession.
After yesterday’s vote, Treasury Secretary Timothy Geithner said: “The Senate did the right thing. Chairman Bernanke will continue to play a vitally important role in guiding the nation’s economy.’’
First appointed by President George W. Bush and then renominated by President Obama, Bernanke has found himself without a broad constituency in the Senate.
Bernanke has admitted making mistakes - including underestimating the threat of a booming housing market that eventually went bust and the resulting fallout. But he insists he can safely steer the recovery from the worst recession since the 1930s.