Bernanke rallies more Senate votes for confirmation
Tuesday, January 26, 2010
Ben S. Bernanke's confirmation for a second term as Federal Reserve chairman appeared to be back on track Monday, as more senators indicated that they will support him when a vote is held in the days ahead.
His confirmation was thrown into question late last week when several key senators balked at giving Bernanke four more years as the nation's top economic policymaker. The uncertainty offered a glimpse of the political pressure cooker in which the Fed would probably operate in the months ahead, analysts said.
On Monday, Sens. Max Baucus (D-Mont.), Joseph I. Lieberman (I-Conn.) and Lindsey O. Graham (R-S.C.) said they would vote to confirm Bernanke for a second term. Sen. John McCain (R-Ariz.) said he would vote against confirmation. Senate leaders plan the vote for this week, though it had not been scheduled as of Monday afternoon. Senate Majority Whip Richard J. Durbin (D-Ill.) told reporters that Bernanke pledged "transparency and accountability" around Fed decisions in the American International Group bailout.
Following a weekend in which Obama administration officials -- including the president -- worked the phones to shore up Senate support for Bernanke, various interest groups on Monday made their own views known: the liberal group MoveOn.org, for example, is against Bernanke. The U.S. Chamber of Commerce and the Independent Community Bankers of America support confirmation.
"He has my strongest support," President Obama said Monday in an interview with ABC News. "I think he's done a good job."
If Bernanke is not confirmed by Sunday, when his current term expires, Fed Vice Chairman Donald L. Kohn would probably take over as interim chairman.
The stock market rose modestly on Monday, regaining some of the ground lost on Friday when prospects for Bernanke's confirmation seemed shakier. The Standard & Poor's 500-stock index was up 0.5 percent Monday.
On Tuesday, the Fed begins a two-day policymaking meeting, where it is expected to leave its target interest rate unchanged near zero as it affirms its plan to wind down purchases of mortgage-related securities by the end of March. But the confluence of Bernanke's confirmation troubles and the meeting is a vivid illustration of the difficult political environment in which the Fed will be making policy.
In other words: Just imagine if the Fed were looking to raise interest rates or take other unpopular action, at a moment when Bernanke's job was on the line.
"They're fortunate that they can keep a low profile right now and not do much of anything from a policy standpoint," said Peter Hooper, chief economist at Deutsche Bank Securities. "The political pressure on the Fed has unequivocally increased."
That could change down the road, when the economy is improving enough or inflation warnings are such that the central bank looks to raise its target interest rate -- which could well occur while the unemployment rate is still high. Political pressure also could make it harder for the Fed to undertake a range of other policies, such as pulling away from its programs to support consumer and business lending.
Even assuming Bernanke is confirmed, Congress and the Obama administration have other ways to influence Fed decisions. Two Fed governor slots are currently vacant. Also, Kohn's term as vice chairman ends July 23, potentially creating a third vacancy (his term as a governor runs until 2016, so he could elect to remain at the Fed).
Meanwhile, Congress is considering legislation that could overhaul the Fed's authority and power; one idea would strip its responsibility for supervising the nation's banks.