Obama to tap Bernanke for second term as Fed chief

US President Barack Obama will nominate Ben Bernanke to a second term as chairperson of the Federal Reserve on Tuesday, keeping him on the job of guiding the world’s largest economy out of its deepest downturn since the Great Depression.

Obama will make the announcement in Massachusetts with Bernanke at his side and will praise Bernanke’s ”bold actions” to save the financial system from collapse, a senior administration official said on Monday.

Bernanke, whose appointment to a new, four-year term as head of the US central bank must be confirmed by the Senate, has flooded crippled financial markets with hundreds of billions of dollars in Fed liquidity and stepped in to attempt rescues of failing financial institutions such as Bear Stearns and AIG.

Obama’s Democrats control the Senate, but Bernanke has faced criticism from lawmakers of both parties who say he has gone too far in extending Fed support that will be difficult to unwind, threatening future inflation.

Investors have generally given Bernanke high marks on the job and had widely expected him to be kept on by Obama, although the announcement was not expected until later this year.

Analysts said the early move by Obama — well before Bernanke’s four-year term ends on January 31 2010 — would be welcomed by financial markets and end any lingering worries about who might lead the Fed as it nurses the economy back to health.

”Agree or not, the types of applications and the size of [the Fed’s] intervention are now established in the annals of Fed policy making as one of the most dramatic responses ever,” said David Kotok, chairperson of Cumberland Advisors in Vineland, New Jersey.

Bernanke, a 55-year-old former Princeton University economics professor, was appointed by Obama’s Republican predecessor, President George Bush, to succeed Alan Greenspan, who stepped down in January 2006

Widely respected as a top scholar on the Great Depression, Bernanke has long called for a more transparent central bank. While praised for his decisiveness in the heat of crisis, Bernanke has also faced criticism for being slow to lower interest rates as the economy started to deteriorate in 2007, and for failing to spot the housing bubble and push for tougher mortgage lending rules when he was a Fed Board member earlier in the decade.

US S&P 500 stock market futures showed little reaction to the Bernanke news and were down 0,3% in Asia trade, dragged down by a regional stock retreat, after the index dipped 0,1% the previous day.

‘Bold action’
In remarks prepared for delivery at an event in Martha’s Vineyard, where Obama is on vacation, the president will also say the US car industry is ”showing signs of life” and the US credit and housing markets have been ”saved from collapse”, the official said.

”The man next to me, Ben Bernanke, has led the Fed through one of the worst financial crises that this nation and this world have ever faced,” Obama will say in a statement to the media at 1pm GMT.

Obama will say Bernanke had dealt with the financial crisis with ”bold action and outside-the-box thinking that has helped put the brakes on our economic freefall”.

”Our auto industry is showing signs of life. Business investment is showing signs of stabilising. Our housing market and credit markets have been saved from collapse,” Obama will say.

Obama also will hit back at Bernanke’s critics, defending Bernanke’s actions as ”steps of necessity, not choice”.

”Taken together, all of these steps have brought our economy back from the brink. They are steps that are working.”

Bernanke has sketched out an exit strategy to pull the economy back from exceptionally low interest rates and extricate the Fed from a flood of loans to financial markets without sparking inflation, although some analysts are skeptical the US central bank can pull off the task.

The Fed has said that due to continuing weakness in the economy and continuing job losses, it is not yet time to withdraw the support.

”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,” Obama will say.

”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.” – Reuters

We make it make sense

If this story helped you navigate your world, subscribe to the M&G today for just R30 for the first three months

Subscribers get access to all our best journalism, subscriber-only newsletters, events and a weekly cryptic crossword.”

Related stories


Already a subscriber? Sign in here


Latest stories

Roads flooded, buildings washed away in latest Durban downpour

No deaths have been reported after mudslides caused by heavy weekend rains

OPINION| ANC’s socialist thinking is crushing South Africa’s future

The Cold War ended more than three decades ago. That period of history showed that socialism, at a country scale, is unsustainable

Nthikeng Mohlele comes up short with ‘The Discovery of Love’

The talented novelist Nthikeng Mohlele’s debut short-story collection lacks the vitality that makes short stories magical

What is at the root of white anxiety in post-apartheid...

Some white people think any discussion of racism or its legacy is an attempt to shame or condemn them for the ‘sin’ of their whiteness

press releases

Loading latest Press Releases…