- The Washington Times - Friday, January 29, 2010

The Senate on Thursday handed Federal Reserve Chairman Ben S. Bernanke a second term after a week of contentious and sometimes suspenseful debate.

Easily approving the nomination with a 70-30 vote, the Senate rejected arguments by senators mostly at the political extremes on the left and right that Mr. Bernanke made fatal mistakes that led to the global financial crisis and great recession of the past two years.

The Senate’s action ensures that the former Bush administration economist, mild-mannered Princeton professor and expert on the Great Depression will steer the world’s most powerful central bank for another four years.

What lies ahead is the challenge not only of nurturing the economy back to health and reducing double-digit unemployment, but undoing many of the controversial steps the Fed took to counter the crisis, from bailing out financial goliaths to printing money at prodigious rates.

The vote in the end was lopsided in favor of Mr. Bernanke, despite predictions by some Wall Street analysts that he might win over as few as 51 senators after personally lobbying many of them for support in the past week.

Yet in a measure of how deeply divided opinion was on his performance during the crisis, Thursday’s vote was the closest vote on record for a Fed chairman. The closest previous vote was the 84-16 approval of Paul Volcker for a second term in 1983, after the Fed had raised interest rates close to 20 percent in a war against double-digit inflation. Mr. Volcker now serves a close economic adviser to President Obama.

Even supporters declined to give Mr. Bernanke a ringing endorsement in light of the Fed’s numerous regulatory stumbles, neglect of Wall Street excesses, and wildly unpopular bailouts during his first term.

“I’ve told him that his performance has been far from perfect,” said Sen. Orrin G. Hatch, Utah Republican. “We have to think about who would be chosen to replace him. I am terrified this administration would choose someone far more liberal, and far more inclined to get the government more involved in the private sector.”

Other senators fretted about the consequences of leaving the Fed leaderless at a time when the financial markets have taken a turn for the worse and the economy is showing signs of slowing from a tentative recovery.

“While he probably hasnt made all the right calls, Im not aware of anyone involved in the financial crisis that has,” said Sen. Bob Corker, Tennessee Republican.

But he credited Mr. Bernanke for being “nonpartisan” and having “working knowledge of what brought about the financial crisis and the actions taken to prevent an even deeper recession,” which made him the best candidate to guide the Fed through the difficult months and years ahead.

Mr. Bernanke’s detractors continued to sharply criticize him even after the vote.

“We need a leader at the Fed who has more concern for Main Street and consumers,” said Sen. Tom Harkin, Iowa Democrat. “I do not believe that our economic policy should be held hostage forever to the Wall Street threat that total collapse is the sure result of not doing everything they want.”

“The Senate rubber-stamped a failed economic policy,” said Sen. Jim DeMint, South Carolina Republican. “Chairman Bernankes easy-money policy fueled the housing bubble, and his push for Wall Street bailouts made things worse.”

Bernanke supporters warned that, with the economy in a still-fragile state, now was not the time to force radical change on the Fed, which is the agency on the front lines fighting the recession.

Thursday’s vote came amid news that the economy weakened at the end of last year and early this year after posting robust growth during the summer and fall, when government stimulus measures promoting auto and home sales drove a pick-up in economic activity.

Senate banking committee Chairman Christopher J. Dodd, Connecticut Democrat, warned colleagues that ousting Mr. Bernanke would be “dangerous” and would provoke a sharp reaction in financial markets. The stock market skidded by 5 percent last week, partly in reaction to signs that Mr. Bernanke’s nomination was running into trouble in the Senate.

Despite the Senate approval of Mr. Bernanke, stocks continued to decline Thursday amid troubling signs of setbacks in the job market and technology sector, as well as a credit-rating downgrade of the entire British banking sector.

The Dow Jones Industrial Average was down by 125 points at 10,111 in midafternoon trading just before the Bernanke vote, but cut losses to less than 90 points in the hour after the vote. The Dow ended the day at 10,120, down almost 116 points.

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