Challenges loom for Fed chief Bernanke in second term

— -- Ben Bernanke dodged months of rumors Tuesday when President Obama renominated him as chairman of the Federal Reserve. But that doesn't mean the former Princeton professor will be coasting for the next four years.

Economists say Bernanke faces an array of challenges nearly as imposing as last fall's economic crisis. They include ensuring a smooth recovery without igniting inflation, and contending with calls from a newly emboldened, less deferential Congress for a more open Fed that some say should be subject to government audits. Lawmakers are also skeptical toward Obama's proposal to expand the Fed's powers to head off threats to the financial system.

After Obama announced the nomination while vacationing in Martha's Vineyard in Massachusetts, a casually dressed Bernanke thanked him for "his unwavering support for a strong and independent Federal Reserve." Bernanke vowed "to help provide a solid foundation for growth and prosperity" as well as "price stability."

Most economists believe Bernanke will be confirmed by the Senate but could get bruised on the way. Many lawmakers cheered Bernanke's renomination, saying he prevented a financial crisis from spiraling into calamity. Others said he failed to head off the housing bubble that set off an epic tailspin.

Senate Republican Leader Mitch McConnell of Kentucky said Bernanke's confirmation hearing "will be an opportunity for the chairman to provide greater transparency on the actions the Fed has taken."

Some lawmakers denounce Fed policies that keep secret the names of banks that borrow billions of dollars. The Fed says disclosing their identities would compromise their stability.

Just 30% of Americans in a recent Gallup Poll said the Fed was doing an excellent or good job, a confidence gap some economists say should be closed to ensure smooth markets.

Most economists agree Bernanke's most difficult task will be recognizing when to raise interest rates and withdraw programs that pumped liquidity into clogged credit markets, to head off inflation. The chairman faces a high-wire act as he tries to do so without squelching the recovery.