Newsmax TV & Webwww.newsmax.comFREE - In Google Play
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
Tags: bernanke | confirmation

Bernanke in the Hot Seat Before Senate

Thursday, 03 December 2009 09:14 AM EST

He angered Congress and the public for bailing out Wall Street. He failed to detect early signs of the housing collapse.

And now, he may be helping feed another speculative bubble.

Yet Ben Bernanke is all but certain to win Senate approval for another term as chairman of the Federal Reserve.


Mainly because even his critics concede that Bernanke helped keep the Great Recession from becoming a second Great Depression.

President Barack Obama, who nominated him to a second term, has said he thinks Bernanke has the knowledge and ability to guide a lasting economic recovery. So do many on Capitol Hill.

Bernanke, 55, will appear Thursday before the Senate Banking Committee, seeking confirmation for another four years as head of the nation's central bank.

Despite their attacks on the Fed as a too-secretive institution that's failed as a regulator, many lawmakers express confidence in the economic stewardship of its current leader.

A soft-spoken consensus-builder, Bernanke conjures up the image of the scholarly professor he was for years. Privately, Bernanke has forged relationships on Capitol Hill that have helped solidify his standing.

On the one hand, for example, Banking Committee Chairman Christopher Dodd (D-Conn.), wants to eliminate the Fed's supervisory powers because its regulators failed to spot and combat abuses that triggered the housing crisis.

Yet on the other hand, Dodd says Bernanke has ably managed the financial and economic debacles.

Without Bernanke's bold moves at the height of the financial crisis last year, Dodd and other lawmakers have acknowledged that it likely would have worsened.

Drawing on lessons learned as a scholar of the Great Depression, Bernanke rolled out a slew of bold and unprecedented programs to help ease credit clogs and spur lending. He coordinated emergency relief actions with central banks overseas.

He slashed a key lending rate to a record low near zero.

Those steps — along with a $787 billion stimulus package — eventually helped pull the country out of recession. The economy has now entered a fragile recovery.

Even so, it probably won't be strong enough to stop the unemployment rate — now at a 26-year high of 10.2 percent — from rising into 2010, Fed officials and private economists say. And that poses a threat to lawmakers in next year's congressional elections.

The biggest sore point with the public — and their representatives in Congress — was the government's bailout of Wall Street, even as ordinary Americans suffered.

The multi-billion-dollar bailouts of American International Group and other financial firms that continued to hand out huge bonuses sparked fury. They also fueled worries that the Fed's moves would encourage further reckless bets by companies.

In response to the bailouts, some lawmakers not only want to rein in the Fed, as Dodd would do, but also subject it to deeper scrutiny. Rep. Ron Paul (R-Texas), for instance, has led efforts to open the secretive Fed to audits. A House panel approved the measure Wednesday as part of a revamping of the nation's regulatory structure.

Sen. Bernie Sanders, an independent from Vermont, said he's so upset about the bailouts he plans to try to block Bernanke's nomination by putting a "hold" on it when it reaches the Senate floor.

Essentially that means the Senate would need 60 votes to approve the nomination, rather than a simple majority. That could slow the approval process but is unlikely to derail it.

Treasury Secretary Timothy Geithner, in an interview on CNBC Thursday, said: "We're confident he'll be confirmed."

Geithner, who was chief of the Federal Reserve Bank of New York before taking the Treasury job, credited Bernanke with "enormous creativity and bravery" in confronting the financial crisis. "We're lucky to have him in the job," Geithner said.

Bernanke has gone further than his predecessors to make the Fed more transparent. He's provided more detailed accounts of its closed-door meetings, doubled the number of economic projections made each year and begun detailing the Fed's emergency lending program, bailouts of companies and other operations.

But he warns that Congress' efforts risk injecting the legislative branch into Fed decisions on interest rate policy. Those decisions must operate without political interference, Bernanke has argued.

Senators at Thursday's hearing are likely to vent their frustration to Bernanke about rising unemployment, stagnant incomes, record-high home foreclosures and other issues that are weighing on their constituents.

Key government relief programs in these areas are the domain of Treasury Secretary Timothy Geithner. Still, the Fed chief's main duty is overseeing the entire U.S. economy.

With nearly 16 million Americans out of work, Bernanke is likely to be pressed on whether more government help is needed. Proposals floated include a tax credit for employers that increase payrolls.

Other ideas are to create New Deal-like programs whereby the government would provide jobs and to send more money to battered state governments.

Bernanke's main focus is trying to keep the recovery going. To nurture it, the Fed has repeated its pledge to keep rates at record lows for an "extended period."

Economists think the Fed will hold rates near zero at its last scheduled meeting of the year on Dec. 15-16 and probably well into next year.

Yet doing so risks planting the seeds for a speculative bubble later, the Fed acknowledged last week.

Many blame the Fed under Chairman Alan Greenspan for helping feed a housing bubble by holding rates too low for too long after the 2001 recession. That bubble eventually burst, leading to a recession in December 2007.

Before taking over the Fed in February 2006, Bernanke had served as President George W. Bush's chief economist. And before then, he was a member of Greenspan's Fed.

But most of Bernanke's professional life has been in academia, including 17 years as a Princeton economics professor.

Earlier, in graduate school at the Massachusetts Institute of Technology, he became interested in monetary and financial history, including the roots of the Depression and other financial crises.

"Little did I realize then how relevant that subject would become one day," he said earlier this year.

© Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

He angered Congress and the public for bailing out Wall Street. He failed to detect early signs of the housing collapse.And now, he may be helping feed another speculative bubble.Yet Ben Bernanke is all but certain to win Senate approval for another term as chairman of the...
Thursday, 03 December 2009 09:14 AM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
Get Newsmax Text Alerts

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved
© Newsmax Media, Inc.
All Rights Reserved