Bernanke fights for a second term at the Fed
A make-or-break Congress hearing awaits the battling chairman. Stephen Foley reports
Thursday 25 June 2009
There's a lot of job insecurity about in the current economic climate, and more than a few people are having to reapply for their own jobs. No one, though, is having to go through such a long and public interview process as the chairman of the Federal Reserve. Each day brings a new, gruelling round of questioning and performance appraisal. Today might just be the make-or-break day for Ben Bernanke's bid to be reappointed for a second term, when his first runs out in January.
Barack Obama, who will make the final call, most likely in the autumn, said on Tuesday that Mr Bernanke was doing, "a fine job under very difficult circumstances" but gave no clue on his thinking about the future. Lurking behind the questions, are briefings before the President's inauguration that Mr Obama was planning to appoint Larry Summers, his chief economic adviser, when the Fed post became vacant. Mr Summers, a former Treasury Secretary and renowned as much for his abrasive style as for his economic prowess, has made no secret of wanting the job.
And today? This is when Mr Bernanke makes his trickiest appearance yet before Congress, at a hearing into the disputed events of last December, when the Fed chairman and the then-Treasury Secretary Hank Paulson persuaded – some prefer the term bullied – Bank of America to go through with its acquisition of Merrill Lynch.
Expect the members of the House oversight committee to give Mr Bern-anke a grilling, since Congress is already very concerned about the growing power of the Fed and the question of whether it is becoming a tool of Treasury policy – something it fears could be exacerbated by proposals to give it extra regulatory control over the "too big to fail" financial institutions. The committee has subpoenaed the Fed's emails from December and catching Mr Bernanke in any mis-statements could be curtains for his reappointment, but so far the emails have not shown the chairman stepped outside his authority.
Ken Lewis, BofA's chief executive, did Mr Bernanke a favour at his own grilling two weeks ago, saying all sides acted out of the best of motives and he would not claim to have been "forced" to do the Merrill deal.
The wider debate now is about whether Mr Bernanke, the foremost scholar of the Great Depression, has acquitted himself well as Fed chairman during the greatest financial crisis since the 1930s. It was the talk of the Thomson Reuters investment summit last week, for example, when Nouriel Roubini, the bearish New York University professor, gave Mr Bernanke a B+ grade. At the summit, and beyond, the consensus appears to be: Mr Bernanke may not have seen it coming, but thank goodness he knew what to do when it did.
"They said the housing slump was a minor slump, then they argued the bust of housing would have no other effect on the economy, so early on, they got it totally wrong," Mr Roubini said. "But when the stuff hit the fan in August of 2007, then they aggressively started to make a wide range of conventional and unconventional monetary policy options. And on that one, I'll give him credit, that they've been very creative and very aggressive – maybe even too aggressive."
Kim Rupert, at Action Economics, puts Mr Bernanke's chances of reappointment at 60-40 in favour, and says that the odds get better for him with every day the economy improves. "If we get a decent little pick-up in growth, it will be harder for the administration to discredit Mr Bernanke and to not reappoint him, even if they had a phenomenal new pick on the horizon," she said.
And that last point is important, because with each passing day, the Larry Summers trial balloon, sent up at the start of the year, is turning to lead. If Mr Bernanke is having trouble on the Hill, imagine how much worse it would be for the abrasive Mr Summers, whose confirmation hearings would have to open up his departure as president of Harvard University, when he was hounded out over allegedly sexist comments. Amid concerns that the Fed is becoming too closely associated with the Treasury, putting Mr Obama's economics tsar in charge would be a red rag.
Alternative candidates, such as Christine Romer, another White House aide, or the regional Fed governor Kevin Warsh, are not yet seen as having the heft for the job.
If Mr Bernanke gets through today without a gaffe, he could be through to the final round of interviews – with no rivals.
Sales of the tablet are set to fall again, say analysts
Met Police confirm there was a 'minor disturbance' and that no-one was arrested
George Lucas criticises the major Hollywood film studios
Does Chris Grayling realise what a vague concept he is dealing with?
Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets
Parties threaten resort's image as a family destination
I Am Bread could actually be a challenging and nuanced title
- 1 Indian footballer Peter Biaksangzuala dies after injuring spine doing somersault celebration
- 2 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 3 Banksy arrest hoax: Internet duped by fake report claiming that the street artist's identity has been revealed
- 4 Drink alcohol and eat meat to improve male fertility - but cut down on coffee, studies suggest
- 5 Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Residents should throw a street party and mix with immigrant neighbours, councils told
London bus driver allegedly kicks gay couple off for kissing
Russell Brand threatened with arrest after filming outside Fox News headquarters
Amal Alamuddin calls for the return of the Elgin Marbles from Britain: 'Injustice has persisted for too long'
Lord Freud: Tory welfare minister apologises after saying disabled people are 'not worth’ the minimum wage
iJobs Money & Business
£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...
£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....
£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...
£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...