Obama to Appoint Bernanke for Second Term as Fed Chairman

Ben S. Bernanke's first term is up Jan. 31.
Ben S. Bernanke's first term is up Jan. 31. (Reed Saxon - AP)
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By Michael D. Shear and Neil Irwin
Washington Post Staff Writers
Tuesday, August 25, 2009

OAK BLUFFS, Mass., Aug. 24 -- President Obama will reappoint Ben S. Bernanke as chairman of the Federal Reserve, administration officials said Monday night, electing to maintain continuity in the nation's most powerful economic policymaking job in a time of crisis.

The decision, expected to be announced Tuesday morning, ends speculation about the fate of the nation's top banker. Bernanke won praise for the unprecedented actions taken to contain the recession, but came under withering criticism from lawmakers for not preventing the financial meltdown that dragged the country and the rest of the world into a deep downturn.

If the Senate confirms him, Bernanke would serve a second four-year term when his current one ends on Jan. 31. He would, in his second term, begin the difficult task of unwinding the Fed's extensive interventions in the economy.

A senior White House official said Obama has been impressed by Bernanke's handling of the economic crisis over the past year and wants to maintain a steady hand in place as the economy begins to recover.

"The president wanted the team that has been working to rescue this economy together," the official said, speaking on the condition of anonymity because the decision has not been formally announced.

When Obama was elected, Bernanke seemed a long shot to be reappointed. He is a Republican -- appointed by George W. Bush to succeed Alan Greenspan -- and had failed to prevent a deep recession. Many Fed watchers expected Obama to turn to his current chief economic adviser, Lawrence H. Summers, for the chairmanship of the Federal Reserve.

But in the past nine months, Bernanke has undertaken a slew of bold actions to contain the crisis and to try to limit its damage to the broader economy. Under his leadership, the Fed has cut short-term interest rates essentially to zero, deployed nearly $2 trillion to support mortgage lending and lower long-term interest rates, created innovative programs to support lending to consumers and businesses, and undertaken stress tests of large banks that helped instill confidence.

In part because of those steps, the economy seems to be stabilizing. The nation seemed to be at risk of a Great Depression-style collapse last winter, and now it merely seems to be experiencing a deeper-than-usual recession.

The decision to reappoint Bernanke is likely to soothe financial markets. Financial analysts have overwhelmingly preferred that Obama stick with Bernanke, given the fragile economy, rather than replace him.

White House chief of staff Rahm Emanuel, Treasury Secretary Timothy F. Geithner and Summers all recommended to the president that Bernanke be retained, according to the administration official.

Summers, former president of Harvard University, was the leading alternative to Bernanke, and there were several dark-horse candidates.

But the administration official said Summers is staying in his current job "first, because no one can do what Larry can as the president's right-hand adviser on the economy and because the president wants and needs his whole economic team together."

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