OAK BLUFFS, Massachusetts (Reuters) - U.S. President Barack Obama will reappoint Ben Bernanke for a second term as chairman of the Federal Reserve on Tuesday, a senior administration official said on Monday.
Bernanke, whose four-year term as the head of the U.S. central bank is due to end next February, will also be praised by Obama for his handling of the worst financial crisis since the Great Depression, the official said.
Financial markets have generally given Bernanke high marks on the job and his reappointment was widely expected, although a White House announcement was not expected until later this year.
Some critics, however, say Bernanke was part of a Fed that failed to spot a ballooning housing bubble and stood idly by as risky lending grew, leading to the current crisis.
- COMMENTARY: RICK MECKLER, PRESIDENT OF INVESTMENT FIRM LIBERTYVIEW CAPITAL MANAGEMENT, NEW YORK
”It’s not a huge surprise to people: he has the support of most of the business community. With the markets being so fragile, it would be surprising if he headed in a new direction.
”Given that the broad markets rallied, they probably want to send the message to the markets that there’s going to be stability... It is just too risky at this point in the recovery to take a chance...
“While this is positive, I don’t think in and of itself it is something that will send (the market) skyrocketing.”
“A change in leadership at this time will only add more uncertainty to the outlook right now. So the market will probably comfortable with Chairman Bernanke continuing in the role; that basically will help support the increased optimism that we have seen around the world in recent months.”
”The reappointment is likely to have a positive impact as it reduces risks of potential changes in U.S. monetary policies and instead increases predictability.
“Given that he’s the one who has orchestrated U.S. monetary policies to go through the current financial crisis, it is fair to say that he is the most well suited person to lead those policy unwindings. But it would be a another question whether he should be reappointed a third time for a longer-term job.”
KHOON GOH, SENIOR MARKET ECONOMIST ANZ-NATIONAL, WELLINGTON
”It clears out one uncertainty. Given that Bernanke has handled the crisis very well and is in high regards by the markets, the announcement will be taken positively.
“There’s going to be a consistency in term of policy set the Fed has been pursuing. There’ll no change to the way the Fed will be handling things. Stability is good.”
”I think its very smart; it will be encouraging for the market. He’s viewed very positively -- he saved us from depression and the economy is recovering; so he’s viewed very favorably.
”The markets were looking for him to be reappointed. It will be viewed very positively by the markets in the morning.
”The markets have taken a favorable view of him in recent weeks as the economy has recovered, and the White House has been shrewd in re-appointing him to retain confidence in the recovery of the economy and financial markets.
CHENG CHENG-MOUNT, ECONOMIST FOR HONG KONG AND TAIWAN, CITIGROUP
”I think most of Asia will welcome Bernanke’s reappointment. He has done a lot in trying to fix the global financial crisis and I believe with his reappointment and efforts that is going to increase risk appetite, which will be good for Asia.
“He is also a familiar face and people have gotten used to his policies. If the U.S. had appointed someone new, that will create more market uncertainty.”
THE STATE INFORMATION CENTRE, A GOVERNMENT THINK-TANK IN BEIJING:
”Bernanke specializes in research into the Great Depression. He has no problem in terms of academic capability and the experience needed to keep stable growth.
”He pays more attention to price stability than Greenspan, including prices in the capital markets. “Bernanke is more conservative, but he was also quite quick to respond to the economic slowdown.”
DONG XIAN‘AN, CHIEF MACRO ECONOMIST, INDUSTRIAL SECURITIES, SHANGHAI
”It’s crucial to have the most swift and coordinated effort in terms of global financial and economic policies to address the crisis. And the monetary policy of U.S. Fed, led by Bernanke, has contributed a lot.
”We can basically trust Bernanke to protect the value of U.S. assets and guard global economic growth.
“However, China should not put all its hope on the Fed to safeguard its national interest.”
TAKAHIDE NAGASAKI, CHIEF FX STRATEGIST, DAIWA SECURITIES SMBC, TOKYO
”Financial markets had thought that there was a good chance Bernanke would be reappointed.
“When you look at responses to last year’s financial crisis, bold action was taken and the market reacted to that favorably. I don’t think there will be any major impact but it should be positive for stock and bond markets in the sense that an element of uncertainty has been removed.”
“If you look back and see what Bernanke has done over the last couple of years the general consensus is that an appropriate policy has been delivered. To even suggest that he may not be returned at this stage would be a very dangerous thing and introduce uncertainty to the market, which would not be welcome right now.”
”There was never a doubt he would be reappointed. He has had to face huge challenges, namely the credit crisis and related downturn.
“He has dealt with it promptly and avoided a depression. So far, so good. But there are challenges ahead and he will have draw on his own experience and learn from Japan’s policy initiatives in tackling depression, which were very often too late.”
”Bernanke’s staying means no dramatic and unexpected change in U.S. monetary policy, which should make the Bank of Korea’s future moves more predictable than with a new man in the Fed.
”The South Korean central bank would likely move along with other central banks in rate tightening although the rising asset prices are really a concern.
“I don’t think the present Bank of Korea governor Lee Seong-tae will be reappointed early next year, which is another uncertainty for the future monetary policy in Korea.”
- Financial market reaction to the news was muted. U.S. stock futures were marginally lower following a lackluster performance overnight on Wall Street.
- Bernanke,55, has led the Fed and the U.S. economy during its most tumultuous period since the Great Depression of the 1930s. The announcement on Tuesday will end any lingering worries about who might head the central bank as the economy recovers. - Bernanke was appointed by President George W. Bush to succeed Alan Greenspan and is a widely respected monetary scholar who has long called for a more open central bank.
Reporting by Simon Rabinovitch, Mantik Kusjanto, Lee Chyen Yee, Anirban Nag, Umesh Desai, Aiko Hayashi, Masayuki Kitano, Harry Suhartono, Miyoung Kim, Seo Eun-kyung, Langi Chiang in Asia, and Megan Davies in New York