President Obama on Tuesday nominated Federal Reserve Board ChairmanBen Bernanke for a second four-year term.
Obama and Bernanke appeared together on Martha's Vineyard, where the president is vacationing.
Bernanke was chosen by President George W. Bush to replace Alan Greenspan in 2006. Together with Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers, Bernanke helped craft a set of economic stimulus and financial regulation policies intended to help the U.S. weather the recession.
"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 plans to say, according to prepared remarks provided to USA TODAY by one of the officials.
Officials who spoke on condition of anonymity said said Geithner, Summers and White House chief of staff Rahm Emanuel all recommended Bernanke's renomination, which requires Senate confirmation.
Senate Banking Committee Chairman Chris Dodd, D-Conn., said that although he felt Bernanke was "too slow to act during the early stages of the foreclosure crisis … he ultimately demonstrated effective leadership, and his reappointment sends the right signal to the markets."
Bernanke, 55, a former Princeton University economics professor and department chairman, joined the Federal Reserve in 2002. He became chairman of Bush's Council of Economic Advisers in 2005.
As Fed chairman, he masterminded what is now seen as a successful strategy to lift the economy out of recession, unlock credit and stabilize financial markets, in part by using unconventional and unprecedented lending programs. But he's not without his detractors, and Dodd warned of a thorough hearing before Bernanke takes his post for a second time.
Many on Wall Street and in academic circles believe that Bernanke is the best choice to lead the country into a sustainable recovery and would be in the best position to figure out when and how to reel in the trillions of dollars pumped into the economy to battle the crisis.
"Wall Street can rest a little easier now," said Chris Rupkey, an economist at the Bank of Tokyo-Mitsubishi. "Having a new chairman come in at this late date would put the Fed-engineered solution to both the recovery and the exit strategy at risk."
Bernanke, appearing last week at an annual Fed conference in Jackson Hole, Wyo., received heaps of praise from economists, academics and central bankers from around the world for his handling of the crisis. In sharp contrast, just a year earlier, as the financial crisis intensified, Bernanke was under siege because of the unprecedented actions he was taking.
But his actions now are bearing fruit. The recession is bottoming and the economy is poised for growth. However, the recovery will be slow and the unemployment rate, now at 9.4%, is likely to top 10% this year before it starts going down.
Even with this challenge ahead, many economists and Wall Street types believe Bernanke is best suited to deal with the challenge of lowering the unemployment rate, gradually reducing joblessness and fighting off the threat of inflation.
In remarks prepared for the announcement Tuesday, Obama praised Bernanke for leading the country through the meltdown and, with his expertise on the Great Depression, helping prevent a crisis rivaling that of the 1930s.
"Ben approached a financial system on the verge of collapse with calm and wisdom, with bold action and outside-the-box thinking that has helped put the brakes on our economic free-fall," Obama said in prepared remarks obtained by the AP.
In sticking with Bernanke, Obama is looking to reassure the financial sector and foreign central banks that his administration has no plans to change course.
Any move to replace Bernanke could have been perceived as injecting politics into the Fed, especially if Obama had turned to Lawrence Summers, his top economic adviser, as Bernanke's replacement.
For Obama, there was little political downside in choosing to nominate Bernanke to a second four-year term. The move displays bipartisanship and a steady, unchanging hand on the economic tiller. Fully occupied with an attempted health care overhaul, Obama's team could little afford the distraction of changing the head of the Fed.
"The actions we have taken to stabilize our financial system, repair our credit markets, restructure (the) auto industry and help the overall economy recover have all been steps of necessity, not choice," Obama said in prepared remarks for the announcement. "They have faced plenty of critics, some of whom argued that we should stay the course or do nothing at all. But taken together, all of these steps have brought our economy back from the brink. They are steps that are working."