Obama Nominates Fed Chairman Ben Bernanke for Second Term

By David Saltonstall
DAILY NEWS SENIOR CORRESPONDENT

OAK BLUFFS, Mass. -- Declaring that Federal Reserve chair Ben Bernanke has led the U.S. "through one of the worst financial crises that this nation and this world have ever faced," President Obama re-nominated the Republican economist Monday morning to another term.

"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," a vacationing Obama told reporters here Monday morning. "But because of his background, his temperament, his courage, and his creativity, that's exactly what he has helped to achieve."

Bernanke, a one-time Princeton University professor who joined Obama at the press conference, is widely credited with overseeing the biggest expansion of the central bank's power in its 95-year history.

"The Federal Reserve, like other economic policy makers, has been challenged by the unprecedented events of the last few years," Bernanke told reporters. "We have been bold, or deliberate, as circumstances demanded, but our objective remains constant—to restore a more stable and economic environment, in which opportunity can again flourish, and in which Americans' hard work and creativity can receive their proper rewards."

Obama and Bernanke—both dressed down in blue blazers, white shirts and no ties, as befitting this vacation isle—took no questions at announcement clearly timed to coincide with the markets' opening.

Wall Street seemed to cheer news of Bernanke's re-nomination even before the president took the podium: Standard & Poor's 500 Index futures rose amid new reports that also showed house prices declining and consumer confidence rising.

Bernanke's nomination for a second four-year term starting Jan. 31 requires Senate approval but was quickly endorsed Monday by the head of the Senate Banking Committee, Democrat Christopher Dodd (D-CT), as well as Sen. Charles Schumer (D-N.Y.).

"He is smart, thoughtful, and not an ideologue—the kind of person we need as we work to turn the economy around, get GDP rising and start creating jobs again," Schumer said in a statement. "He is the right choice for these tough times."

The Fed chief—first appointed by former President George W. Bush—will still face tough questions from lawmakers who say he was slow to confront the mortgage crisis and didn't do enough to protect American consumers while handing out massive bailouts to financial firms like Bear Stearns Cos. and American International Group Inc.

While Obama acknowledged this morning that "we are a long way away from a completely healthy financial system," he used the announcement to tout his economic reforms to date.

"Our recovery plan has put tax cuts in people's pockets, extended health care and unemployment insurance to those who have borne the brunt of this recession, and is continuing to save and create jobs that otherwise would have been lost," Obama said. "Our auto industry is showing signs of life. Business investment is showing signs of stabilizing. Our housing market and credit markets have been saved from collapse."

Obama decided to reappoint Bernanke because he wanted to keep together the team that had weathered the crisis, a senior administration official said. That team includes Treasury Secretary Timothy Geithner, Chief of Staff Rahm Emanuel and National Economic Council Chairman Larry Summers.

As Fed chief, the 55-year-old Bernanke slashed the main interest rate almost to zero and pumped $1 trillion into the banking system to unfreeze credit markets. He now must guide the world's largest economy back to growth and reduce unemployment approaching 10 percent while staving off inflation.

"It's not just that he's done a great job of dealing creatively with the financial crisis," said Richard Berner, co- head of global economics at Morgan Stanley in New York. "He has the capacity to deal with the challenges that lie ahead—continuing to help the economy and markets heal, and engineering the exit strategy when it's appropriate to do so."