Key Democrats back Ben Bernanke for second term as Fed Reserve chairman

Sen. Chris Dodd (D-Conn.) and other Senate Democrats on Thursday strongly backed Federal Reserve Chairman Ben Bernanke’s nomination for a second term.

Dodd, the chairman of the Senate Banking Committee, and Sen. Tim Johnson (D-S.D.) both immediately endorsed the Fed chairman in their opening statements at Bernanke’s confirmation hearing before the panel.

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“I believe you are the right leader for this moment in our nation’s economic history and I think your reappointment sends the right signal to the markets,” Dodd said.

Sen. Evan Bayh (D-Ind.) said he would also support Bernanke's nomination.

While Bernanke appears headed for a second term, the vote on his confirmation will likely be far more divided than the overwhelming support Fed chairmen typically receive.

Sen. Richard Shelby (Ala.), the top Republican on the panel, sharply criticized the central bank, but did not immediately say how he would vote.

Shelby said he long placed confidence in the central bank but that now he is not sure if it was appropriate.

“I fear now, however, that our trust and confidence were misplaced,” Shelby said.

Others were more direct in their criticism of Bernanke.

“I will do everything I can to stop your nomination and drag out this process as long as I can,” said Sen. Jim Bunning (R-Ky.), who has long lashed out at the Fed. “Your Fed has become the creature from Jekyll Island.”

Sen. Bernie Sanders (I-Vt.), a vocal critic of the Fed, said late Wednesday that he would put a hold on Bernanke’s nomination. Sanders said the bank is too focused on Wall Street banks and not the broader economy.

Bernanke defended the central bank’s role in the financial crisis and its structure as Congress weighs major changes.

Bernanke said Thursday that the central bank’s actions have helped spur “the beginnings of a turnaround,” in the United States and around the world.

But Bernanke said the bank is re-evaluating how it supervises banks and said that regulators should “undertake unsparing self-assessments of their past performance.”

Bernanke also defended the bank’s accountability amid efforts to impose new audits on the central bank. Bernanke said an audit could compromise the independence of the Fed.

Bernanke said that Congress left an exemption from audits over monetary policy to “protect monetary policy from short-term political pressures.” Bernanke also defended the regional structure of the central bank, which has 12 branches around the country.

“The structure of the Federal Reserve ensures that our policymaking is informed not just by a Washington perspective, or a Wall Street perspective, but also a Main Street perspective,” Bernanke said.