Bernanke Boost? GOP Leader McConnell Sees Reconfirmation

Economists say if populist anger derails nomination, businesses will be spooked.

ByABC News
January 24, 2010, 1:54 PM

Jan. 24, 2010— -- Saturday's high-gear White House campaign to rally undecided senators around the re-nomination of Federal Reserve Chairman Ben Bernanke may be paying off today.

On NBC's "Meet the Press," Senate Republican Leader Mitch McConnell said he expects Bernanke to win a second term.

"He's going to have bi-partisan support in the Senate and I would anticipate he will be confirmed," McConnell said, without saying how he would vote personally.

Investors are breathing a tentative sigh of relief. If Bernanke's nomination is defeated, the message from economists and analysts is: Look out below.

"This Friday was a preview," said Tom Gallagher of ISI, an investment advising firm, who believes the Fed chairman will get the 60 votes he needs to move the nomination forward and will ultimately be confirmed.

But if populist politics derail the nomination, he said, "It will be bad for everything: the dollar, stocks, maybe even bonds. Gold will be up -- the predictable market reaction."

"If the Senate doesn't confirm Bernanke," said Mark Zandi of Moody's, "It will spook businesses. It will be another reason for businesses not to hire and invest."

Even so, Sen. John Cornyn, R-Texas, said today on C-SPAN's "Newsmakers" that he plans to vote against Bernanke's reconfirmation and expects opposition will continue to grow.

"I think it's a fluid, fluid thing," he said.

He didn't predict an outcome, but said he's not convinced the votes are there for Bernanke to be reconfirmed.

"People are still digesting what they've been told by the voters in Massachusetts, and how that taps into the national mood and their own prospects in 2010," he said. "I think what the voters have told us this week is they don't want the same old thing. They want a fresh start. They want people who will listen."