WASHINGTON – The Senate Banking Committee on Thursday approved the nomination of Federal Reserve Chairman Ben Bernanke for a second term, despite misgivings among many senators, sending it to the full Senate for a final confirming vote.
The panel backed the nomination on a 16-7 vote as several senators in opposition voiced concern over perceived Fed missteps that laid the groundwork for the financial crisis and some of the actions it has taken since the crisis broke.
"I strongly disapprove of some of the past deeds of the Federal Reserve while Ben Bernanke was a member and its chairman, and I lack confidence in what little planning for the future he has articulated," said Senator Richard Shelby, the panel's top Republican.
The Senate is not expected to take up Bernanke's nomination for a second four-year term at the helm of the U.S. central bank until after it reconvenes after a holiday break on January 19. While approval is widely expected, Bernanke faces an unusual amount of opposition.
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Bernanke's current term expires on January 31, although he could continue to serve as acting chairman even if the Senate fails to approve him by then.
The opposition to the nomination on the Senate floor looks likely to exceed the 16 no votes former Fed Chairman Paul Volcker drew in 1983, after he raised interest rates to double digits, triggering back-to-back recessions to crush inflation.
Bernanke and the Fed have become lightning rods for anger over financial excesses and government bailouts of big financial firms, such as insurer American International Group. Bernanke has defended the Fed's aggressive actions to shore up the financial systems as necessary to avoid a second Great Depression.
Analysts widely agree the economy would have suffered more without the central bank's support of private firms, but the economy nonetheless experienced its deepest recession since the 1930s.
With the unemployment rate in double digits for the first time in more than a quarter century, public resentment over the taxpayer-funded rescue of the banking sector runs high.
Tapping that anger, lawmakers are looking at steps that could diminish the Fed's regulatory role and subject its interest rate decisions to congressional audits -- proposals Bernanke strenuously argued against.
"I strongly support this nomination. But I want to be clear with my support comes my insistence that we carefully examine the role of the institution that runs the risk of becoming too complicated to succeed," the panel's chairman, Democratic Senator Christopher Dodd, said.
Because of efforts under way as Congress debates regulatory reforms, Bernanke faces the prospect of leading a diminished institution.
Many lawmakers feel the institution was derelict in policing the financial firm risk-taking that set the stage for the financial collapse. Others blame the Fed for fueling the housing bubble by keeping interest rates too low for too long earlier this decade, when Bernanke served as a Fed governor.
Still, Bernanke has drawn support from some important quarters, suggesting his nomination is still on track for approval.
"The experience that Chairman Bernanke has had over the last year and a half makes him by far ... the most well-equipped person to lead the Fed over the next several years," said Republican Senator Bob Corker, a member of the banking panel.
Bernanke has mounted an unprecedented public relations campaign for a Fed chairman to make the case his crisis-fighting actions were needed to spare ordinary Americans from deeper economic pain, giving nationally televised interviews and writing a newspaper opinion article.
The Fed chairman may have gotten a lift on Wednesday when Time Magazine named him its Person of the Year, crediting him with saving the U.S. economy from a second Great Depression.
Even so, Bernanke's political weakness was underscored in a poll earlier this month by Rasmussen Reports showing a scant 21 percent of the public support his renomination.
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