Obama Gets Assurances Senate Will Back Bernanke, Official Says

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Obama Gets Assurances Senate Will Back Bernanke, Official Says


By Joshua Zumbrun and Catherine Dodge

Jan. 23 (Bloomberg) -- President Barack Obama received assurances today from Senate leaders that Ben S. Bernanke will be confirmed for a second term as Federal Reserve chairman, an administration official said.

Support for Bernanke came from Richard Durbin, the second- ranking Senate Democrat who earlier was undecided. Christopher Dodd, a Democrat who chairs the banking committee, and Judd Gregg, the top Republican on the budget committee, said they are confident that Bernanke will be confirmed, even after some members of both parties announce their opposition.

Stocks fell yesterday in part on concern that support for the Fed chairman was eroding. Obama called some senators today, including those in the leadership, to ensure Bernanke’s confirmation won’t be derailed, said the administration official, who spoke on condition of anonymity.

“I saw Ben Bernanke under fire, facing our nation’s most serious economic crisis since the Great Depression,” Durbin said in a statement. “We need his steady hand as we build our economy and create new jobs across America.”

Of senators who released statements or were contacted by Bloomberg News yesterday and today, 30 said they would vote for Bernanke or were leaning in his favor, while 16 were opposed or leaning against him and 31 were undecided.

Bernanke’s critics, including some who support him for a second term, said the Fed failed to regulate banks before the credit crisis and questioned its involvement in the $182 billion bailout of New York-based insurer American International Group Inc. The Democratic Party’s loss of a Senate seat in Massachusetts this week has added to pressure on those senators facing re-election at a time of rising voter anger over the economy.

Durbin, Kerry

Durbin said he would continue to demand that the Fed make a commitment to transparency and accountability. Senator John Kerry, a Massachusetts democrat, also endorsed Bernanke while saying in a statement that “It’s understandable why there is debate, questioning, and even anger about the renomination.”

Gregg, from New Hampshire, said Bernanke will get support from a “good” number of Republican senators because he’s the “best person” for the job.

“We’ll have a good vote amongst Republicans,” Gregg said in an interview. “I’ve talked to a number of people.”

“Why would Republicans who are not up for re-election and who are not trying to make a political point vote against the guy when he’s done a good job and is probably better than what the alternative would be?” he said.

Gregg and Dodd said in a statement: “Based on our discussions with our colleagues, we are very confident that Chairman Bernanke will win confirmation.”

‘Vocal Opposition’

The statement said the pair wanted to address “a flurry of media reports on Chairman Bernanke’s confirmation prospects, highlighting a very vocal opposition.”

Though the majority of Democratic senators who have made their opinions known back Obama’s nomination of Bernanke, five of the party’s caucus participants are opposed and 20 others have declared themselves undecided.

Two Democrats who face re-election this year -- Barbara Boxer of California and Russ Feingold of Wisconsin -- yesterday said they will oppose the 56-year-old former Princeton economist. Senate Majority Leader Harry Reid late yesterday came out in favor of Bernanke after earlier wavering.

Reid’s Support

Reid’s backing “makes a big difference,” said Laurence Meyer, a former Fed governor and now vice chairman of consultant Macroeconomic Advisers LLC in Washington. “What that does is begin to stabilize, limit the further erosion” of support, Meyer said.

“You have this populist surge out there that’s been intensified and reinforced by the Massachusetts election,” said Norm Ornstein, a political scientist at the American Enterprise Institute in Washington.

Obama, seeking to help Democrats in the midterm elections, has enlisted the aid of David Plouffe, who managed Obama’s 2008 presidential campaign.

“We want all our best players on the field for 2010 and he is the best of the best when it comes to marrying strategy and tactics,” said David Axelrod, a senior White House adviser.

The Standard & Poor’s 500 Index fell 2.2 percent yesterday to 1,091.76 in New York on uncertainty over Bernanke’s confirmation prospects and Obama’s plan, announced a day earlier, to curb proprietary trading by banks.

‘Worst Signal’

Dodd, who proposes stripping the Fed of banking supervision authority, said yesterday that rejecting Bernanke would send the “worst signal to the markets right now” and produce an economic “tailspin.”

Traders at Intrade, a Web exchange for futures contracts based on political outcomes, saw an 82.5 percent chance Bernanke would be confirmed, down from 93 percent Jan. 21. The contract traded as low as 65 percent yesterday before rebounding after Reid announced his support.

Obama, who nominated Bernanke for a second term in August, sought to shore up support for the Fed Chairman as his four-year term, which ends Jan. 31, drew to a close without a scheduled confirmation vote.

Treasury Secretary Timothy Geithner and White House Chief of Staff Rahm Emanuel made calls to Democratic senators to press for Bernanke’s confirmation, according to administration officials, who spoke on condition of anonymity. Gregg lobbied Republicans, the officials said.

To contact the reporters on this story: Catherine Dodge in Washington at cdodge1@bloomberg.netJoshua Zumbrun in Washington at jzumbrun@bloomberg.net
Last Updated: January 23, 2010 20:47 EST

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the hot potato in Bernanke's hands is getting hotter, and I believe that he is not the one to be blamed.

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Cobra

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