Ben Bernanke Awaits Key Senate Vote On Fed Reappointment

Ben Bernanke, the famous Federal Reserve chief, is expected to overcome Senate apprehension and win a second term as head of the nation's foremost bank.

The Senate has scheduled a key vote Thursday that will determine whether the Fed chief has at least a nominal 60 senators on his side to beat a blocking of his reappointment. Senate leaders from both parties expressed hopes that he would prevail.

No Choice

Bernanke's reappointment will most probably be the slimmest for a Federal Reserve nominee, including looking back at the opposition to Paul Volcker's appointment to the Fed in 1983, when he was confirmed for a second term by a vote of 84-16. No Fed chairman nominee has yet been rejected by the Senate.

Meanwhile, the stock market seems to be on the side of Bernanke. The Dow Jones industrial average plunged last week from news of mounting Republican opposition to his appintment, then recovered when his prospects brightened after much lobbying from the Obama administration.

The Federal Reserve Bank holds enormous power over the value of American wallets. It's primary and most visible power rests on the authority to set interest rates that influence economic activity, employment and inflation. This power over interest rates helps maintain economic stability by making emergency loans to banks when they can't get cash elsewhere.

"I believe that the chairman is going to be confirmed by a bipartisan vote," Senate Republican leader Mitch McConnell, R-Ky.

Hard Decisions

Credited with avoiding a financial meltdown, Bernanke has upset the public and lawmakers with his support of Wall Street bailouts, most prominent being the $182 billion monetary rescue of insurance giant American International Group Inc. The criticism has increased as unemployment rose to double digits and banks paid out huge bonuses to its executives.

Critics also placed blame on him for not detecting the financial crisis in time and failing to control the banking industry.

"He was asleep at the switch while Wall Street became a gambling casino," said Sen. Bernie Sanders, a verbose Vermont independent who is among the senators in opposition to his reappointment.

The next biggest challenge facing the Fed in 2010 will be how and when to put everything back the way it was and raise interest rates. To keep the economy going, the Fed on kept interest rates at a record low and pledged to hold them there for some time.

Though Bernanke may overcome an opposition movet with 60 or more votes, his support on the final confirmation vote will probably be minimal and marginal. Several senators have said they would oppose blocking a vote on his confirmation but would vote against his reappointment.

Sanders stopped short of conceding that Bernanke would win the vote, but he said a close and thin tally would send a message to President Barack Obama on their views about Bernanke's reappointment.

The confirmation fight and the attacks on the Fed have become a test of central bank independence. The Fed strongly guards its autonomy as a crucial element for carrying out monetary policy, even if it isn't popular and doesn't make politicians happy.

Bernanke was first sourced by former President George W. Bush to run the nation's central bank. Obama picked him for a second term in August. His term expires Jan. 31.