‘Bernanke Fiddled While Our Markets Burned,’ Republican Senator Says

January 28, 2010 - 3:54 PM
Fed chief awaits key Senate vote on confirmation
(Editor’s note: The Associated Press has reported that the Senate voted Thursday to overcome a filibuster that would have tanked Bernanke’s nomination. The Senate will move to a final confirmation vote.)

Washington (AP) - Senate critics arrayed themselves against Federal Reserve Chairman Ben Bernanke on Thursday, determined to take issue with his bid for a second term leading the nation's central bank even as his confirmation seemed assured.
 
Bernanke needed a 60-vote super majority to beat a filibuster aimed at blocking his reappointment. Even his opponents predicted he would prevail in the vote scheduled for mid-afternoon.
 
"Bernanke fiddled while our markets burned," said Sen. Richard Shelby, R-Ala., voicing a common complaint that Bernanke did not detect the coming crisis and failed to rein in the banking industry.
 
His supporters argue that once the crisis was upon him he used aggressive and creative measures to bring stability to the financial system.
 
"He has kept a steady hand on the tiller in a perfect economic storm," Sen. Robert Menendez, D-N.J., said.
 
The vote could still be the slimmest for a Federal Reserve nominee, eclipsing the opposition to Paul Volcker in 1983, when he was confirmed for a second term by a vote of 84-16. No Fed chairman nominee has been rejected by the Senate.
 
The stock market has been rooting for Bernanke. The Dow Jones industrial average plunged last week amid news of mounting opposition, then recovered when his prospects brightened.
 
The Federal Reserve wields enormous power over American pocketbooks. It has the power to set interest rates that influence economic activity, employment and inflation. And it helps maintain economic stability by making emergency loans to banks when they can't get cash elsewhere.
 
"I believe that the chairman is going to be confirmed by a bipartisan vote," Senate Republican leader Mitch McConnell, R-Ky., said Wednesday.
 
Widely credited with avoiding a financial catastrophe, Bernanke has angered the public and lawmakers with his support of Wall Street bailouts - especially the $182 billion rescue of insurance giant American International Group Inc. The criticism has mounted as unemployment has risen to double digits and banks paid out huge bonuses to their executives.
 
"He was asleep at the switch while Wall Street became a gambling casino," said Sen. Bernie Sanders, a Vermont independent who is among the opposition.
 
The biggest challenge facing the Fed this year will be how and when to reverse course and raise interest rates. To foster the recovery, the Fed on Wednesday kept interest rates at a record low and pledged to hold them there for some time.
 
Though Bernanke may overcome a filibuster threat with 60 or more votes, his support on the final confirmation vote will probably be smaller. Several senators have said they would oppose blocking a vote on his confirmation but would vote against his reappointment.
 
Sanders stopped short of conceding that Bernanke would be confirmed, but he said the close tally would send a message to President Barack Obama.
 
The confirmation fight and the attacks on the Fed have become a test of central bank independence. The Fed jealously guards its autonomy as a crucial element for carrying out monetary policy, even if it isn't popular with politicians.
 
Bernanke, 56, was first tapped by President George W. Bush to run the nation's central bank. Obama picked him for a second term in August. His term expires Jan. 31.
 
Most of his professional career was in academia. He spent 17 years teaching economics at Princeton.
 
Bernanke came to Washington to take a job at the Federal Reserve, working with then-Chairman Alan Greenspan. Bush selected him to be his top economist. After that, he went on to run the Fed, starting in 2006.