Bernanke confirmation runs into resistance in Senate
Some key lawmakers in the Senate are saying they will vote against the Bernanke confirmation. The Fed chairman’s term expires at the end of this month.
New York
The reappointment of Federal Reserve Chairman Ben Bernanke, whose term expires at the end of this month, has unexpectedly bogged down in the US Senate.
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Although many Fed observers still expect Mr. Bernanke to be confirmed for another term next week, some key senators are now announcing they will vote against him.
The anti-Bernanke senators say that the Fed failed to police the banks. Some Democrats complain that Bernanke was appointed by the Bush administration, which they want to blame for the economic collapse.
To some supporters of Bernanke – an authority on the Depression – the opposition is an example of how Democrats are reacting to the Scott Brown victory in Massachusetts. The Bernanke backers, meanwhile, say that he saved the US economy from an even worse downturn and deserves reappointment.
The brouhaha over Bernanke’s nomination comes right before the Fed meets to vote on interest-rate policy next Wednesday. America’s central bank is expected to leave short-term interest-rate policy unchanged.
It’s not clear if the vote on Bernanke will take place by then.
The prospect that the Fed chairman might not have the votes in the Senate is unsettling to some stock-market investors. If he is not confirmed, they expect the US dollar to fall, interest rates to rise in the bond markets, and the stock market to tumble. On Friday, the Dow Jones Industrial Average dropped 216.90 points after falling 335.55 points the prior two days.
“The appearance of outright political interference at the Fed would result in a very negative reaction in the markets,” says Jeffrey Kleintop, chief market strategist at LPL Financial in Boston.
Many Fed-watchers worry that foreign investors might decide to move their money to safer havens.
“Investors abroad will think we’ve lost our minds,” says former Fed governor Lyle Gramley in Washington. “It’s the last thing we need with our fragile recovery.”
On Friday, two senators – Sens. Barbara Boxer (D) of California and Russ Feingold (D) of Wisconsin – said they would vote against Bernanke.
