By Ian Swanson - 08/25/09 09:08 AM EDT
President Barack Obama nominated Federal Reserve Chairman Ben Bernanke to a second term on Monday, saying Bernanke had led the Fed through one of the worst financial crises the world had ever seen.
Obama, speaking at his Martha’s Vineyard vacation spot with Bernanke by his side, said the chairman had approached a financial system on the verge of collapse with calm, wisdom, bold action and outside-the-box thinking that had stopped an economic freefall.
Bernanke thanked Obama for the nomination and vote of confidence, and said he and the Fed would continue to work to provide an opportunity for the economy to flourish.
Bernanke said if he is confirmed, he will work to his utmost capability to help provide a “solid foundation for growth and prosperity” in an environment of price stability.
Futures on Wall Street rose on the news after the Dow Jones Industrial Average reached its high for the year at Monday’s close.
The nomination comes after the Federal Reserve under Bernanke has taken unprecedented steps to rescue the economy from financial collapse.
Bernanke lobbied Congress to approve a $700 billion bailout of the nation’s banks and has lowered interest rates to nearly zero percent. He also has launched an array of new programs at the Fed intended to increase the flow of credit.
Obama acknowledged actions by his economic team have been controversial, but defended moves to bail out banks and the auto industry and to repair credit markets as steps of “necessity, not choice.” He also said they had helped bring the economy back from the brink.
The announcement of Bernanke’s nomination comes as the White House braces for news about its latest budget forecast, which will show the nation’s 10-year deficit jumping from $7 trillion to $9 trillion. That forecast is sure to make Obama’s goal of moving healthcare legislation through Congress even more difficult as members of both parties question whether the nation can afford it.
In his remarks, Obama said he would continue to push for healthcare reform and another key initiative, regulatory reform of the financial industry that he said would prevent a similar collapse.
“We have already seen how lax enforcement and weak regulation can lead to enormous wealth for a few and enormous pain for everyone else,” Obama said. “And that’s why even though there is some resistance on Wall Street from those who prefer things the way they are, we will pass the reforms necessary to protect consumers, investors and the entire financial system.”
In a statement that criticized the chairman for being too slow to react to the crisis, Senate Banking Committee Chairman Chris Dodd (D-Conn.) said he thought Bernanke's reappointment was "probably" the right choice.
"While I have had serious differences with the Federal Reserve over the past few years, I think reappointing Chairman Bernanke is probably the right choice," Dodd said. "Chairman Bernanke was too slow to act during the early stages of the foreclosure crisis, but he ultimately demonstrated effective leadership and his reappointment sends the right signal to the markets.
"There will be a thorough and comprehensive confirmation hearing," Dodd continued. "I still have serious concerns about the Federal Reserve’s failure to protect consumers and I strongly believe these responsibilities should go to an independent consumer financial protection agency. I expect many serious questions will be raised about the role of the Federal Reserve moving forward and what authorities it should and should not have."
Lawmakers have questioned the Fed’s transparency as it has pumped additional trillions into the economy. Bernanke also came under scrutiny for his involvement in encouraging Bank of America to purchase Merrill Lynch at the height of the crisis last year.
On Monday, a U.S. federal court ruled the Fed must identify companies in its emergency lending programs in a case brought under the Freedom of Information Act by Bloomberg News.Just more than a month ago, lawmakers from both parties interviewed by The Hill were reluctant to endorse Bernanke for a second term.
“I don’t know yet,” Dodd said at the time. “That’s a decision the president gets to make.”
Bernanke was first nominated as chairman of the Federal Reserve by former President George W. Bush, and he was confirmed by a Senate voice vote in 2006.
In recent weeks, Bernanke has told the country that the economy is “leveling out,” even as he has warned the recovery will be a long one. Bernanke has signaled the Fed will eventually unwind some of its involvement in the economy, but has suggested interest rates will remain low for some time.
This story was updated at 9:45 a.m.