Senate Support for Bernanke Suddenly Shaky

Jan. 22, 2010 -- One week ago, the Senate reconfirmation of Federal Reserve Chairman Ben Bernanke appeared to be a foregone conclusion. What a difference a week makes.

Now the Democratic leadership in the Senate worries there are not enough votes to reconfirm the Fed boss, as ABC News first reported Thursday night.

On Friday morning, two more Democrats added their names to the list of liberals opposing a second term for Bernanke.

Watch More on the Bernanke Confirmation Tonight on "World News With Diane Sawyer," at 6:30 p.m. ET

"Under the watch of Ben Bernanke, the Federal Reserve permitted grossly irresponsible financial activities that led to the worst financial crisis since the Great Depression," said Sen. Russ Feingold of Wisconsin in a statement. "And as it responds to the crisis it helped to usher in, the Federal Reserve under Chairman Bernanke's leadership continues to resist appropriate efforts to review that response, how taxpayers' money was being used, and whether it acted appropriately."

Liberals Bailing on Fed Chief

Sen. Barbara Boxer of California noted that she respects Bernanke personally and supported his actions to avert a financial meltdown in the fall of 2008, but she will vote against his nomination.

"It is time for Main Street to have a champion at the Fed," she said. "Dr. Bernanke played a lead role in crafting the Bush administration's economic policies, which led to the current economic crisis."

The latest announcements bring to five the number of Democratic caucus members who have said they will oppose Bernanke.

The Fed chief's main antagonist, Sen. Bernie Sanders, I-Vt., has put a hold on Bernanke's nomination, and it will take 60 votes for the Senate to break a filibuster and proceed to a final vote. Democrats and the White House will need support from some Republicans who support Bernanke.

Sen. Byron Dorgan, D-N.D., and Sen. Jeff Merkley, D-Ore., have also voiced their opposition.

"Dr. Bernanke's approach helped set our economic house on fire," Merkley said Dec. 17 as the Senate Banking Committee voted 16-7 to send the Fed chief's nomination on to the full Senate.

Bernanke Reconfirmation Suddenly in Doubt in Senate

Depending on whether the Senate votes on Bernanke before or after Massachusetts' newly elected Republican Sen. Scott Brown is seated, Bernanke would need five or six Republicans to vote for him if no other Democrats swing to the opposition side.

And a number of Republican lawmakers have been far more vocal than Democrats in denouncing the Fed boss.

At Bernanke's reconfirmation hearing before the Senate panel on Dec. 3, Sen. Jim Bunning, R-Ky., railed, "Your time as Fed chairman has been a failure. … I will do everything I can to stop your nomination."

Despite the growing opposition to the Fed boss, the White House continues to back Bernanke.

Speaking on Air Force One Friday en route to President Obama's events in Ohio, deputy spokesman Bill Burton said, "The president has a great deal of confidence in what chairman Bernanke did to bring our economy back from the brink."

"He continues to think he is the best person for the job and will be confirmed by the United States Senate," Burton noted.

But as more Democrats come out against Bernanke, what was once a foregone conclusion now appears to be very much up in the air.

AIG Legacy Haunts Bernanke

Bernanke is in for a tough week next week. The market could be as well.

Dissatisfaction with Bernanke on Capitol Hill could increase Wednesday as the House Government Oversight Committee holds a hearing examining the Federal Reserve's bailout of AIG. Treasury Secretary Tim Geithner who led the Federal Reserve Bank of New York at the time will testify.

Earlier this week, Bernanke tried to defuse rising anger over the handling of AIG -- one of the few issues that unites both Democrats and Republicans -- by calling on the General Accounting Office to review the actions of the Federal Reserve. Bernanke himself will not be testifying as he will be busy at the Federal Reserve that day, as it announces its decision on interest rates.

With the administration now looking to play the populist card and pick a fight with Wall Street, if Bernanke loses his renomination vote or withdraws, he would be one of first casualties in the election of Scott Brown in Massachusetts.

Members of Congress "are frustrated and anxious and looking to lay blame on someone, and right now he is the easiest one to take out blame on," said Brian Gardner, a political analyst with banking firm Keefe Bruyette & Woods.

With no possible chairman waiting in the wings to be nominated, the market reaction would be, "horrible" said Josh Rosner, a managing director at investment advisor Graham & Fisher.

"It raises questions in investors' minds about the direction of the country," said Garner, "and investors want clarity."

"Senators view the Massachusetts vote as a backlash against incumbents, and they don't see why that should be limited to elected officials," said Lou Crandall, chief economist at Wrightson ICAP

Bernanke's term ends Jan. 31. The clock is ticking.