Obama renominates Bernanke as Fed chairman

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By Christina Bellantoni and Patrice Hill

UPDATED:

President Obama on Tuesday morning nominated Ben S. Bernanke to a second term as chairman of the Federal Reserve.

"Ben Bernanke has led the Fed through the one of the worst financial crises that this nation and this world have ever faced," the president said with Mr. Bernanke at his side while on family vacation in Martha's Vineyard, Mass. "As an expert on the causes of the Great Depression, I'm sure Ben never imagined that he would be part of a team responsible for preventing another. But because of his background, his temperament, his courage and his creativity, that's exactly what he has helped to achieve. And that is why I am reappointing him to another term as chairman of the Federal Reserve."

Mr. Bernanke is a Republican first appointed to the job by President George W. Bush in 2006. His term expires in January.

"I'd like to express my gratitude for the confidence President Obama has shown me and for his unwavering support of the Federal Reserve," Mr. Bernanke, 55, said. "If confirmed by the Senate, I will work to the best of my abilities."

Mr. Bernanke praised the hard work of Fed employees during the financial crisis and thanked his wife and other family members for their support. He also said the Fed's response to the financial crisis was "bold and deliberate."

The reappointment brings the continuity that is considered important in reassuring financial markets that no major changes in Fed policy are in the offing. Financial markets remain fragile, and sentiment on Wall Street strongly favored retaining Mr. Bernanke.

The move is perhaps the most significant display of bipartisanship to date by the president.

The White House's ringing endorsement of Mr. Bernanke's handling of the severe financial crisis that began nearly a year ago comes as criticism of Mr. Bernanke increases in Congress.

Most of the criticism has been aimed at his role in doling out trillions of dollars of aid to rescue failing financial institutions and revive collapsed credit markets. Mr. Bernanke, who is a renowned scholar of the Great Depression, has contended that his actions were necessary to prevent the economy from sinking into another depression. He thinks the Great Depression was caused largely by the Fed's failure to act, and top White House officials largely agree.

The Fed's actions have been coordinated closely with the Treasury, and many of the Fed's rescue operations were spearheaded by Treasury Secretary Timothy F. Geithner when he was president of the Federal Reserve Bank of New York before joining the administration in February.

Mr. Obama never has hidden his admiration of the Fed chairman, congratulating him from time to time for doing what he called a good job. The only criticism was that he and predecessor Alan Greenspan moved too slowly in responding to the housing and mortgage credit bubbles that led to the crisis.

Mr. Bernanke's main competition for the job was top White House economic adviser Lawrence H. Summers, who was Treasury secretary during the Clinton administration. But Mr. Summers also has been a booster of Mr. Bernanke's behind the scenes and publicly, saying that the administration would not agree to any move in Congress to seriously limit his powers or undermine the Fed's independence.

The Fed chairmanship is the most important economic appointment made by the president. The Fed controls short-term interest rates and husbands the supply of money in the United States, making it the federal agency with the most direct and broad-reaching power over the economy.

The Fed's powers have grown enormously in the past year as it frequently tapped into Depression-era emergency authorities to mount massive rescues of financial firms, starting with Bear Stearns in March 2008 and culminating with the record $170 billion bailout of insurance giant American International Group in September.

In addition to these rescues, which have spawned a public outcry and extensive hearings in Congress, the Fed has put in place an unprecedented string of programs aimed at flooding banks and credit markets with money and trying to revive collapsed markets for mortgages and other loans. All of the programs were experimental, with some proving more popular and successful than others.

The biggest task facing Mr. Bernanke as he continues in his job is the massive cleanup operations that the Fed must pursue as it closes its experimental programs. Mr. Bernanke began withdrawal operations earlier this month when the Fed announced that it will close down a particularly controversial program of purchasing long-term Treasury bonds.