Ben Bernanke could have a bumpy ride to reconfirmation, given both Democrats and Republicans in the Senate expressed concern about the Federal Reserve chairman’s handling of the financial market meltdown last year.
Still, one senior Democratic aide said Bernanke would likely be confirmed “by a wide margin— after “some hand-wringing along the way about the role of the Fed.—
Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.) has not yet set a timeline for Bernanke’s confirmation hearings, and a Dodd spokeswoman said it was too soon to say whether the hearing would be held next month. Bernanke, who was appointed by then-President George W. Bush, will see his first four-year term expire Jan. 31.
Dodd said he supports Bernanke continuing as the head of the nation’s central bank but noted he believes Bernanke did not act quickly enough to stem the tide of the mortgage foreclosure crisis that led to a historic government bailout of many banks last year.
“Chairman Bernanke was too slow to act during the early stages of the foreclosure crisis, but he ultimately demonstrated effective leadership and his reappointment sends the right signal to the markets,— Dodd said in a statement. “There will be a thorough and comprehensive confirmation hearing. I still have serious concerns about the Federal Reserve’s failure to protect consumers and I strongly believe these responsibilities should go to an independent consumer financial protection agency. I expect many serious questions will be raised about the role of the Federal Reserve moving forward and what authorities it should and should not have.—
Majority Leader Harry Reid (D-Nev.) also came out in favor of a second term for Bernanke.
“His re-nomination will bring continuity to the Federal Reserve that will send the right signal to the marketplace,— Reid said in a statement.
But Banking ranking member Richard Shelby (R-Ala.) foreshadowed the potentially tough questions Republicans will likely pose to Bernanke during his confirmation hearing, saying the Fed has failed in a number of instances to perform adequately in setting monetary policy and regulating financial institutions.
“The Banking Committee should carefully examine the impact of the Fed’s failures as a bank regulator, how such failures contributed to the financial crisis, and whether Chairman Bernanke’s performance as the chief regulator merits his reconfirmation,— Shelby said in a statement. “Second, we should closely examine the impact ad hoc decision-making had on the financial markets during the crisis. I remain convinced that a thoughtful, more deliberative approach would have led to a better result than the panicked response the regulators chose. Finally, we must be mindful that this crisis is not over. We must determine whether Chairman Bernanke has the strategic vision to chart the necessary course going forward and the resolve to stick to it.—
At the height of the financial crisis, Shelby, along with several other Republicans on the Banking panel, opposed the $700 billion financial industry bailout package for which Bernanke actively lobbied.
Minority Leader Mitch McConnell (R-Ky.) also expressed reservations about Bernanke, the Fed, and the Obama administration’s policies regarding the economic downturn.
“Chairman Bernanke’s confirmation hearing will be an opportunity for the Chairman to provide greater transparency on the actions the Fed has taken, and greater insight into the cumulative impact the administration’s trillions in new spending, borrowing and debt will have on the American taxpayer,— McConnell said in a statement.
While Republicans are likely to question Bernanke on his interventionist policies during the crisis, Democrats are poised to make the case that the Fed has not been active enough in protecting consumers.
Still, Democrats appear ready to try to beat back GOP criticisms and attempts to rein in the Fed’s power.
“There are legitimate criticisms of the Fed, particularly that it dropped the ball for years on consumer protections. But Chairman Bernanke’s confirmation hearing should not be used as a stage by those with wrongheaded political agendas like trimming the Fed’s independence. Whatever one’s view of the Fed’s past lapses, there is no disputing that Bernanke is the best person for the job going forward,— said another Banking member, Sen. Charles Schumer (D-N.Y.).