In some versions of this article, dropped text led to a fragmented sentence at the beginning of the second paragraph. The full paragraph should have read: "Once viewed as the rock at the center of the government's response to the financial crisis, Bernanke has become a target for mounting anti-Wall Street fervor with two Democratic senators registering their opposition Friday and other support softening." This version of the article has the complete text.
Populist backlash puts Federal Reserve Chairman Ben Bernanke under siege
Saturday, January 23, 2010
The populist brushfire that has burned through Democratic fortunes this week threatened Friday to claim Federal Reserve Chairman Ben S. Bernanke, imperiling his nomination for a second term and sending an unsettled stock market tumbling for the third straight day.
Once viewed as the rock at the center of the government's response to the financial crisis, Bernanke has become a target for mounting anti-Wall Street fervor with two Democratic senators registering their opposition Friday and other support softening.
Top Senate Democrats scrambled for votes to confirm Bernanke less than a week after he seemed certain to earn a second term when his first expires Jan. 31. Although Democrats and Republicans alike mostly praise Bernanke for aggressive steps to combat the recession, he is increasingly blamed for failing to rein in Wall Street excesses that led to the crisis and tarred by his role as engineer of the profoundly unpopular bailout for financial firms.
Just days after the Republicans' stunning upset victory in the Massachusetts Senate election, Sens. Barbara Boxer (D-Calif.) and Russell Feingold (D-Wis.) said Friday that they would vote against Bernanke, following the lead of Sen. Byron L. Dorgan (D-N.D.) a day earlier. Many senators who had been viewed by Senate leaders as safe votes for Bernanke said they were undecided.
With Bernanke's fate uncertain, the stock market fell 2.2 percent, as measured by the Standard & Poor's 500-stock index. The Dow Jones industrial average closed at 10,172.98, after losing 552.45 points, or 5.2 percent, since Wednesday. Both indexes fell about 4 percent for the week.
But late Friday, senior Senate aides predicted that they would still assemble the 60 votes needed to reappoint Bernanke, adding that Senate leaders hope to bring his nomination to a vote by the end of next week.
Majority Leader Harry M. Reid (D-Nev.) issued a statement announcing his support for Bernanke. Reid tempered his enthusiasm, however, by insisting that Bernanke "redouble his efforts" to ensure companies and individuals across the economy have access to credit. "He has assured me he will soon outline plans for making that happen," Reid said, "and I eagerly await them."
Other Democrats also rushed to Bernanke's defense, including a White House spokesman and Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), who said that voting down Bernanke could send a bad signal to financial markets and prompt an economic "tailspin."
Paul Volcker, former Federal Reserve chairman and an Obama adviser, said he was concerned that the Fed could be left in a vacuum. "Bernanke has been through a fire, and given the experience he has had, he's a lot more experienced and more qualified than he was four years ago," he said in an interview. If Bernanke were rejected, Volcker added, "I don't think that would be received well at home or abroad."
Anxiety began to build around the fate of Bernanke's reappointment within hours after Republicans seized a crucial 41st Senate seat, throwing President Obama's health-care bill and the entire Democratic agenda into chaos.
On Wednesday, when Senate Democrats met for their weekly luncheon, finger-pointing over the loss in Massachusetts quickly turned to Bernanke, with several liberal senators angrily denouncing the Fed chairman and arguing that he should be held accountable for Obama administration policies that have focused on propping up Wall Street while ignoring ordinary Americans.
"Massachusetts was kind of a wake-up call to many Democrats," said Sen. Bernard Sanders (I-Vt.), a long-standing and vocal Bernanke critic. "People are disgusted and furious with Wall Street and with the state of the economy, and a number of Democrats have been scratching their heads, saying 'why do we want to reappoint a guy who was a member of the Bush administration?' "