Bernanke keeps US Fed chief post
US senate approves second term but by smallest margin in 30 years.
Last Modified: 29 Jan 2010 01:11 GMT
A Great Depression expert, Bernanke says he has the know-how and will to steer the US to recovery [AFP]

The US senate has approved Ben Bernanke's nomination to a second term as chairman of the US Federal Reserve despite the stiffest opposition to any nominee for the post in three decades.

The senate confirmed Bernanke for a new four-year term by a 70-30 vote on Thursday, 14 votes worse than the closest previous vote for a central bank chief in the nearly 32 years the senate has voted on the position.

Some senators credited Bernanke - named by Time magazine as the 2009 "Person of the Year" for his unprecedented response to the financial crisis – with helping to save the US from a second Depression.

Christopher Dodd, the Democratic chairman of the Senate Banking Committee, said Bernanke's leadership "has in no small measure made it possible for this nation to avoid a catastrophe".

Fierce criticism

But in an election year in which the economy's health is still precarious, and unemployment has rocketed to 10 per cent, some senators were withering in their criticism.

Richard Shelby, the top Republican on the Senate Banking Committee, said "Bernanke fiddled while our markets burned".

"Ben Bernanke's Federal Reserve played a key role in setting the stage for the financial crisis."

Shelby and other opponents blame Bernanke for failing to spot problems leading up to the crisis, for lax bank regulation and for not cracking down on dubious home mortgage practices.

All those missteps contributed to the recession, they said.

A particular magnet for criticism was his support for a $182bn rescue of American International Group, the insurance giant that went on to pay hefty bonuses to its executives and billions to its Wall Street partners.

"A vote for Ben Bernanke is a vote for bailouts," said Jim Bunning, a Republican senator and a long time critic.

Bernanke advocates argue that the Fed chairman is being blamed for the failure of institutions over which the Fed had no authority.

What is more, they say the countermeasures he took to intervene were exactly what congress created the independent agency to do in 1913 after a series of bank panics.

Bernanke, who was first appointed by George Bush, the former president, and re-nominated by his successor Barack Obama, found himself without broad partisan support from either Republicans or Democrats in the senate, and the vote on his confirmation came at nearly the last possible moment, with his current term expiring on Sunday.

He has admitted making mistakes, including underestimating the threat of a booming housing market that eventually went bust and the resulting fallout to the economy.

But the former Princeton University professor and expert on the Great Depression says he has the tools, the know-how and the political backbone to safely steer the recovery from the worst recession since the 1930s.

His next challenge will be to decide when and how to reverse course and boost interest rates to soak up the unprecedented money pumped into the economy during the crisis, to prevent an outbreak of inflation.

The closest previous final confirmation vote for a Fed chairman was 84-16 for Paul Volcker's second term in 1983 following another severe recession. 

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