David Prosser: Man of the year struggles in January
Outlook: There is a certain irony in seeing Mr Bernanke saved by the Republicans
Tuesday 26 January 2010
Will the Republican Senate leader Harry Reid be Time magazine's man of the year for 2010? When the magazine handed the 2009 gong to the Federal Reserve chairman, Ben Bernanke, a month ago, it couldn't have imagined that his confirmation hearings for a second term in office would go so badly awry. Still, having seen Mr Bernanke savaged by senior Democrats, Mr Reid offered his backing yesterday – and that bailout ought to be sufficient to ensure that the White House is spared the humiliation of seeing President Obama denied his man by his own side.
There is a certain irony in seeing Mr Bernanke saved by the Republicans, many of whom have been fierce critics of what they see as his inflationary economic stimulus policies. The Democrats, meanwhile, who always supported those policies, are now more preoccupied with the idea that he is too close to Wall Street.
That criticism will continue this week, with hearings into how the bailout of the giant insurer AIG in 2008 saved banks from very substantial losses. Timothy Geithner, the US Treasury Secretary, who ran the Federal Reserve Bank of New York at the time of the AIG bailout, and was thus closely involved, will also come under fire – expect there to be further calls for his head too.
President Obama doesn't want to lose either man, but the political damage to the administration of seeing Mr Geithner forced out would probably be greater. For the budding US economic recovery and the reform of banking regulation, however, Mr Bernanke would be the greater loss, with months of wrangling over who would replace him. For this reason, and despite the very real questions about his record at the Fed, Mr Reid is right to back him.
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