Ben Bernanke Wins Second Term As Federal Reserve Chief

WASHINGTON, Jan. 28, 2010— -- Federal Reserve chairman Ben Bernanke was reconfirmed by the Senate today to a second term as the head of the central bank after surviving weeks of bipartisan criticism for his failure to see the emerging financial crisis that triggered the worst recession since the Great Depression.

The final vote to reconfirm was 70-30.

At the start of the month Bernanke seemed a surefire bet to win the support of lawmakers after he passed a committee vote and was elected TIME magazine's man of the year.

But that all changed when the Democrats lost a crucial Senate seat in Massachusetts, in part due to widespread populist backlash about the nation's ongoing recession.

Support for Bernanke suddenly dwindled. Detractors multiplied.

Even as lawmakers today debated a second term for Bernanke, opposition to the Fed chief brought together some strange bedfellows on Capitol Hill.

"I think this is probably the biggest mistake we're going to make in a long time," Sen. Jim DeMint, R-S.C., warned his colleagues before the vote.

Across the aisle Sen. Barbara Boxer, D-Calif., agreed.

"I think people have to be held accountable for their actions along the way," Boxer said. "Chairman Bernanke has to be held accountable for his."

But confirmation was assured after his nomination survived a Senate cloture vote 73-27, blocking any chance for a filibuster.

Bernanke's critics have claimed that the Fed chief did not do enough to prevent the nation's financial meltdown in the fall of 2008. While even some of his supporters shared that view, Bernanke eventually won the backing of lawmakers who argued that the central bank boss may have helped avert a second Great Depression.

"He basically allowed the Fed to become the lender of the nation," said Sen. Judd Gregg, R-N.H. "The way he did it was extraordinary in its creativity and the results were that the country's financial system did not collapse. And many Americans, every day Americans' lives were not fundamentally disrupted because of the actions of chairman Bernanke."

With the country's economy on the verge of a full-scale collapse in the fall of 2008, Bernanke and other policy-makers in Washington led the charge for massive government intervention. The Fed has since spent trillions on economic rescue programs.

Bernanke was first appointed Fed chairman four years ago by President Bush. Last August President Obama interrupted his summer vacation on Martha's Vineyard to nominate the central bank chief to a second term.

It was the possibility of President Obama nominating someone else should Bernanke lose today's vote that prompted the number-two Republican in the Senate to support the Fed boss.

"I must vote to reconfirm chairman Bernanke simply because I am concerned that another nominee chosen by President Obama would be less independent than chairman Bernanke and would direct the Federal Reserve's resources to support the administration's policy interests," said Sen. Jon Kyl. R-Ariz.

Bernanke's first term at the Fed was set to expire on Sunday. His unexpectedly close reconfirmation fight had sent shivers through the stock market in the past week. The Dow Jones Industrial Average ended last week down 5 percent when doubts about Bernanke's chances began to emerge. As the vote came closer on Thursday, the market improved from its earlier lows for the day.

A handful of lawmakers had even placed a hold on Bernanke's reconfirmation, meaning that it took 60 votes for the Senate to break a filibuster and move on to the final vote.

Independent Sen. Bernie Sanders from Vermont, one of the lawmakers who insisted on a procedural vote, railed on the Senate floor today, "I think ordinary people do not understand ? average Americans have a hard time understanding how we reward failure, how we say to somebody who was asleep at the switch in terms of regulating our financial institutions, 'Congratulations, you failed ? there's a major recession. You're getting reconfirmed.'"

Bernanke also found himself under fire on the opposite side of Capitol Hill earlier this week for his role in the government's record $182 billion rescue of AIG. According to an e-mail cited Tuesday by Sen. Jim Bunning, R-Ky., and confirmed by a whistleblower speaking to Rep. Darrell Issa, R-Calif., staff at the central bank in September 2008 "recommended that the Federal Reserve not touch AIG" and "did not agree" with Bernanke's support for the bailout.

On Wednesday lawmakers on the House Oversight and Government Reform Committee held a hearing on the insurance giant's controversial bailout. Although Bernanke did not testify before the panel, the hearing's contentious exchanges and vitriolic criticisms demonstrated the intense emotions and divided opinions that lawmakers and the general public have about the government's efforts to save the economy.

But ultimately it appeared that lawmakers after a last-minute weekend push by White House officials concluded that to change direction at the Fed with the country's economic recovery still in jeopardy would have been too risky a move.

To leave the Federal Reserve without a leader right now would be "beyond shameful," said Senate Banking Committee chairman Chris Dodd, D-Conn. "It would be the height of irresponsibility."

While the Fed chief today won a second term, the central bank may now lose some of its power. Dodd, for instance, has unveiled financial regulatory reform legislation that would strip the Fed of some of its consumer protection responsibilities.