By Scott Lanman
Jan. 25 (Bloomberg) -- Ben S. Bernanke will keep his job as Federal Reserve chairman, the White House and the Senate’s senior Republican predicted two days after wavering support among some Democrats helped drive stock prices lower.
President Barack Obama “is very confident that the chairman will be confirmed,” David Axelrod, a senior White House adviser, said on CNN’s “State of the Union” program. Senate Republican leader Mitch McConnell said on NBC’s “Meet the Press” that Bernanke will have “bipartisan support in the Senate” even as a number of his party are opposed.
The assurances followed declarations of support for Bernanke from the top two Democrats in the Senate, Nevada’s Harry Reid and Richard Durbin of Illinois, who earlier said they were undecided. John McCain, the Republican 2008 presidential nominee, and John Cornyn, who runs the party’s senate campaign committee this year, are against him. Online traders yesterday raised the odds of approval to 92 percent from as low as 65 percent on Jan. 22.
“We’ve dodged the bullet on this one,” said Greg Valliere, chief policy strategist at Potomac Research Group in Washington. “People were aghast by what happened in the markets on Friday, and do they really want to get angry letters from constituents who have lost money in the stock market because of the Bernanke vote?”
Stocks Hit
The Standard & Poor’s 500 Index dropped 2.2 percent on Jan. 22 to 1,091.76, erasing gains so far in 2010, as Reid and Durbin withheld their support for Bernanke and two Senate Democrats, Barbara Boxer of California and Russ Feingold of Wisconsin, said they would join Republicans already against him. Both Boxer and Feingold are up for election this year.
The Democratic Party’s loss of a Senate seat in Massachusetts last week has added to pressure on those senators facing re-election at a time of rising voter anger over the economy. Bernanke’s critics have blamed the Fed for lax regulation of banks before the credit crisis and questioned its involvement in the $182 billion bailout of New York-based insurer American International Group Inc.
“It is difficult for governors or chairmen to discharge responsibility under a cloud of uncertainty regarding the security of tenure,” Philippine central bank Deputy Governor Diwa Guinigundo said in an interview in Manila today when asked about Bernanke’s struggle to get confirmed. “It’s best the appointment of a central bank governor is depoliticized.”
Impact on Regulation
While Bernanke’s chances of winning a second term improved, comments by lawmakers supporting him suggest that the 56-year- old former Princeton University economist will be under greater scrutiny on bank regulation and consumer protection.
Durbin, the Senate majority whip, said in a Jan. 23 statement that he will “continue to demand that the Federal Reserve make a commitment to transparency and accountability in its policies.”
“I will make it clear that if the Federal Reserve refuses to exercise its authority to demand bank reform and protect America’s consumers, I will join with members of Congress to push for new laws that achieve those goals,” he said.
Reid plans a senate vote on Bernanke’s confirmation this week, said Jim Manley, a spokesman. His term expires Jan. 31.
Senate Rules
Bernanke’s supporters need 60 votes to limit debate and clear the way for a final vote. Under Senate rules, a motion to limit debate would set up a procedural vote after two legislative days to curtail additional debate to 30 hours.
McConnell indicated enough Republicans will join Democrats in backing the central banker.
“I would anticipate he will be confirmed,” the Kentucky Republican said on NBC. McConnell declined to say how he would vote.
“We believe he will be confirmed,” White House Press Secretary Robert Gibbs said on “Fox News Sunday.”
White House senior adviser Valerie Jarrett said on NBC that Obama received assurances from Reid over the weekend that Bernanke will be confirmed, after support among Democrats ebbed in the wake of an upset victory by Republican Scott Brown in the Jan. 19 Massachusetts special election. Axelrod called Bernanke “a steady hand in the crisis.”
McCain’s Vote
Arizona’s McCain, who lost to Obama in 2008, said he is leaning toward voting against Bernanke, while being “worried” about the impact from rejecting the Fed chief.
“The fact is that Chairman Bernanke was in charge when we hit the iceberg,” McCain said on CBS’s “Face the Nation.” “His policies were partially responsible for the meltdown that we experienced, and I think he should be held accountable.”
Cornyn, of Texas, said on “Fox News Sunday” he would vote against Bernanke, while Republican Orrin Hatch of Utah and Democrat Robert Menendez of New Jersey told CNN they would support the Fed chief, a Republican first appointed by President George W. Bush four years ago.
Bernanke may get as many as 70 Senate votes, Valliere said. “After Massachusetts, nothing’s certain, but I think it’s very likely that he’ll win,” Valliere said.
Of senators who released statements or were contacted by Bloomberg News over the past two days, 31 said they would vote for Bernanke or were leaning in his favor, while 17 were opposed or leaning against him and 30 were undecided.
Dodd, Gregg
Christopher Dodd, the Connecticut Democrat who chairs the banking committee, and Judd Gregg of New Hampshire, the top Republican on the budget committee, said they are confident that Bernanke will be confirmed.
“I have some misgivings about Fed policy and the economic policy, but this man has guided us through a crisis,” Durbin said yesterday on CBS.
Richard Shelby, the senior Republican on the Senate Banking Committee, yesterday dismissed Dodd’s assertion on Jan. 22 that rejecting Bernanke risked sending the “worst signal to the markets” and triggering an economic “tailspin.”
Any decline in financial markets wouldn’t “last very long,” Shelby, of Alabama, said on CNN. Bernanke will see “a lot of tough votes against him,” and that would be a “strong message,” said Shelby, who reiterated his opposition to the Fed chief.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.
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