US President Barack Obama was expected to nominate Ben Bernanke to a second term as chairman of the Federal Reserve, seeking to keep him in place to steer the world's largest economy out of its deepest downturn since the Great Depression.
Obama was expected to make the announcement with Bernanke at 9am yesterday, a senior White House official said on Monday.
“Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and outside-the-box thinking that has helped put the brakes on our economic freefall,” Obama was expected to say.
The widely expected news appeared to have had no significant impact on financial markets in Asia and Europe yesterday, with investors more focused on whether a global economic recovery was really under way.
“I don't think there will be any major impact, but it should be positive for markets such as the stock and bond markets in the sense that an element of uncertainty has been removed,” said Takahide Nagasaki, chief forex strategist at Daiwa Securities SMBC in Tokyo.
Bernanke, whose appointment to a new four-year term must be confirmed by the Senate, has pushed US interest rates to near zero and flooded financial markets with hundreds of billions of dollars to stem a credit crisis and turn back recession.
Obama is counting on the former Princeton University professor to nurse the economy back to health at a time when unemployment, home foreclosures and bank failures are still mounting.
While many analysts think the long US downturn has finally ended, they expect a sluggish recovery and some worry the economy could easily tip back into recession.
Obama's Democrats control the Senate, but Bernanke has faced criticism from lawmakers of both parties who say he has gone too far in extending Fed support that will be difficult to unwind, threatening future inflation.
“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,” Senate Banking Committee Chairman Christopher Dodd said in a statement.
Dodd, a Democrat, promised a “thorough and comprehensive” hearing to consider the nomination.
Investors have given Bernanke, whose current term expires on Jan. 31, high marks and had widely anticipated his reappointment, although an announcement was not expected until later this year.
Analysts suggested Obama was aiming for stability.
“Agree or not, the types of applications and the size of [the Fed's] intervention are now established in the annals of Fed policy-making as one of the most dramatic responses ever,” said David Kotok, chairman of Cumberland Advisors in Vineland, New Jersey.
The other main candidate had been Lawrence Summers, Obama's top White House economic adviser and a former US Treasury secretary. But the choice of Summers would have been seen by many as threatening the Fed's independence.
Bernanke, 55, was appointed by Obama's Republican predecessor, president George W. Bush, to succeed Alan Greenspan, who stepped down in January 2006.
Widely respected as a top scholar on the Great Depression, Bernanke essentially rewrote the rule book of central banking by creating a host of innovative lending programs to unfreeze credit markets.
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