Aletho News

Confirmation of Bernanke feared as kiss of death for Senate Democrats

Jan. 22 (Bloomberg) — Senate Majority Leader Harry Reid said he was undecided on whether to back Ben S. Bernanke for a second term as chairman of the Federal Reserve, even as President Barack Obama expressed confidence he will win Senate approval.

“For right now, yes he is” undecided on whether to vote for confirmation, Jim Manley, a spokesman for the Nevada Democrat, said in an e-mail. Obama “continues to think he’s the best person for the job and will be confirmed,” Deputy Press Secretary Bill Burton told reporters traveling with Obama in Ohio.

Democrats Barbara Boxer of California and Russ Feingold of Wisconsin, both facing re-election this year, said today in Washington they’ll oppose Bernanke, whose term ends at the end of the month. Senate Finance Committee Chairman Max Baucus, a Democrat, and Judd Gregg, a Republican member of the banking committee, said there’s enough support for Bernanke to secure his Senate confirmation.

Bernanke, while navigating the economy through the worst slump since the Great Depression, has drawn fire from lawmakers for lax regulation prior to the financial crisis and for putting taxpayer dollars at risk through the rescues of Bear Stearns Cos. and American International Group Inc.Christopher Dodd, chairman of the Senate Banking Committee, renewed his support for the Fed chief today.

Rejecting Bernanke would send the “worst signal to the markets right now” and produce an economic “tailspin,” Dodd, a Democrat from Connecticut, told reporters. “This is the most important central banker in the world.”

Obama Bank Plan

U.S. stocks fell, extending the biggest weekly drop since October, as financial shares slumped for a second day on Obama’s plan to rein in banks and results at Google Inc. disappointed investors. The Standard & Poor’s 500 Index was down 1 percent to 1,105.49 at 2:10 p.m. in New York.

The Banking Committee voted 16-to-7 on Dec. 17 to recommend Bernanke’s nomination to the full Senate, with 12 Democrats and four Republicans in favor. Six Republicans and one Democrat, Jeff Merkley of Oregon, were opposed.

Dodd reminded Republicans today that they initially named Bernanke to his post — and that rejecting his nomination would amount to replacing him with a Democratic pick.

“Remember this was George Bush’s choice as well,” Dodd told reporters today. “Do they want to have the president make his choice for the chairman of the Federal Reserve? Do the Republicans really want that? That would be rather interesting to see.”

The Fed chief will probably need 60 votes in the Senate to break procedural holds from at least four lawmakers. Baucus, a Democrat from Montana, said that while Bernanke is likely to be confirmed, the vote may not come before his term expires at the end of the month.

No Date Certain

“I can’t give you a date, but clearly he will get confirmed,” Baucus, a Democrat from Montana, said. Asked if Bernanke’s confirmation is in trouble, Baucus said, “No.”

The loss in the Massachusetts election this week to fill the seat left vacant by the late Senator Edward M. Kennedy has shaken Democrats, making it harder for party leaders to rally support for Bernanke, said Norm Ornstein, a political scientist at the American Enterprise Institute in Washington.

“It’s more than procedural now because you have this populist surge out there that’s been intensified and reinforced by the Massachusetts election,” he said. “It doesn’t kill the Bernanke reconfirmation but it means for Reid to get to 60 is going to take a greater effort.”

Dorgan Opposition

Senator Byron Dorgan, a North Dakota Democrat who is retiring this year, said he will oppose Bernanke because the Fed chief rebuffed Dorgan’s request to identify firms that received loans from the Fed during the financial crisis.

“I just think that’s unacceptable,” Dorgan said. “I don’t think his nomination should come up until he provides the information that’s requested.”

The Fed is appealing a federal judge’s August decision in a lawsuit filed by Bloomberg LP, the parent of Bloomberg News, to release names of firms that received central bank loans.

Traders at Intrade, a Web exchange for futures contracts based on political outcomes, see an 80 percent chance Bernanke will be reconfirmed, down from 93 percent yesterday. The contract has traded as high as 85 percent today. The bid- ask spread on contracts is currently 6.1 percentage points, indicating uncertainty about the odds of reconfirmation.

‘Really Rattle’

A failure to confirm Bernanke “would really rattle the market,” said Karl Mills, who helps manage about $30 million as chief investment officer for Jurika Mills & Keifer LLC in Oakland, California. “The Fed chair you know is better than the one you don’t. In this political environment, we’re not presuming anything anymore.”

Under Senate rules, a motion to limit debate on Bernanke’s nomination would set up a procedural vote after two legislative days to curtail additional debate to 30 hours. Bernanke’s supporters need 60 votes to limit debate and clear the way for a final vote on whether to confirm him for another term.

Dodd and Senator Richard Shelby of Alabama, the panel’s senior Republican, have said the Fed failed to adequately supervise banks. Dodd has also said Bernanke deserved “substantial credit” for helping avert “utter economic catastrophe.”

“It is time for a change — it is time for Main Street to have a champion at the Fed,” Boxer said today in a statement. “Our next Federal Reserve Chairman must represent a clean break from the failed policies of the past.”

The Fed chairman has increased government backstops to banks and other firms and used the Fed’s balance sheet to revive credit, including through the purchase of $1.25 trillion in mortgage-backed securities.

“Under Chairman Bernanke’s watch, predatory mortgage lending flourished, and ‘too big to fail’ financial giants were permitted to engage in activities that put our nation’s economy at risk,” Feingold said in a statement.

To contact the reporter on this story: Edwin Chen in Cleveland at echen32@bloomberg.net

January 22, 2010 - Posted by aletho | Corruption, Progressive Hypocrite