- The Washington Times - Thursday, December 3, 2009

Federal Reserve Chairman Ben S. Bernanke on Thursday offered a strong defense of his handling of last year’s near collapse of the economy, telling a Senate panel considering his pending reconfirmation that his actions helped avert an even greater crisis.

The nation’s central banker added that his agency has the necessary tools to further repair the still wobbly economy — an implicit push back at congressional proposals to curtail the Federal Reserve’s regulatory powers.

“As severe as the effects of the crisis have been, however, the outcome could have been markedly worse without the strong actions taken by the Congress, the Treasury Department, the Federal Reserve, the Federal Deposit Insurance Corporation and other authorities both here and abroad,” he told a hearing of the Senate Committee on Banking, Housing and Urban Affairs. “We played a central role in efforts to quell the financial turmoil.”

While the chairman is facing significantly stronger scrutiny this time than during his near-unanimous confirmation four years ago, he is expected to keep his job.

Mr. Bernanke reminded the senators that he slashed interest rates to almost zero and pumped more than a trillion dollars into the financial system to beat back the worst financial crisis since the Great Depression.

Mr. Bernanke also said the Federal Reserve is prepared to end government aid to the financial sector, saying that the current $700 billion Wall Street bailout program will be phased out “in a smooth and timely way as markets and the economy recover.”

On the prospect of firms paying back their taxpayer-funded loans, he said he thought the government would come “pretty close to break-even” on its investment.

Mr. Obama nominated Mr. Bernanke, a former Princeton University economics professor, in August for a second four-year term as chairman. The Senate banking committee is expected to vote in the next few weeks on whether to send the nomination to the full Senate for a final vote.

Sen. Christopher J. Dodd, Connecticut Democrat, who chairs the committee, announced Thursday he will support Mr. Bernanke’s reconfirmation, saying that he was “the right leader for this moment in our nation’s economic history.” Mr. Dodd added that Mr. Bernanke’s reappointment “sends the right signal to [financial] markets.”

Sen. Evan Bayh, a moderate Indiana Democrat, warned of excessive “Monday-morning quarterbacking,” despite the Federal Reserve’s having made errors dealing with the economic crisis.

“I will support you, not because I think you didn’t make mistakes, but because I think you’re in the best place to improve the situation, to maximize the chances that we do not have a recurrence” of a major economic crisis, Mr. Bayh told Mr. Bernanke

But Mr. Bernanke’s road to confirmation does face some roadblocks.

Sen. Jim Bunning, Kentucky Republican, who was the only senator to oppose Mr. Bernanke’s nomination four years ago, accused the chairman of incompetence and called him a “moral hazard” to the stability of the nation’s economy.

“Under your watch, every one of the major banks failed, or would have failed, if you hadn’t have bailed them out,” he said. “Your time as Fed chairman has been a failure.”

Mr. Bunning was particularly critical of the Mr. Bernanke’s support of the government’s $85 billion loan to the insurance giant American International Group.

“I will do everything I can to stop your nomination and drag it out as long as I can,” Mr. Bunning said.

Another Bernanke critic, Sen. Bernard Sanders, Vermont independent, said Wednesday he would seek to block the Senate from reconfirming the chairman and placed a “hold” on President Obama’s choice.

“The American people overwhelmingly voted last year for a change in our national priorities to put the interests of ordinary people ahead of the greed of Wall Street and the wealthy few,” Mr. Sanders said. “What the American people did not bargain for was another four years for one of the key architects of the Bush economy.”

The 100-member Senate would need 60 votes to override Mr. Sanders’ “hold” maneuver to move forward with a vote.

While not expected to derail Mr. Bernanke’s confirmation, the maneuver could slow down the process.


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