August 25, 2009 / 3:06 AM / 8 years ago

Obama renominates Bernanke as Fed chief

OAK BLUFFS, Massachusetts (Reuters) - U.S. President Barack Obama nominated Ben Bernanke to a second term as Federal Reserve chairman on Tuesday, aiming for continuity at a time when the U.S. economy is breaking free from a deep recession.

The decision, while widely expected, was welcomed by financial markets and policy makers around the globe. Economists said it removed uncertainty at a delicate juncture in the economy’s recovery.

Obama interrupted his vacation on the Massachusetts island of Martha’s Vineyard to make the brief announcement with the 55-year-old Bernanke at his side.

“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 said.

Bernanke’s four-year term expires in January and the president had not been expected to make an announcement until later this year. Obama acted now to “put to rest” speculation about the Fed chairman’s future, a White House official said.

The announcement may have also been timed to deflect attention from less market-friendly news on Tuesday. The White House raised its 10-year cumulative budget deficit projection by $2 trillion to approximately $9 trillion.

That would push the national debt up from more than $11 trillion now to more than $20 trillion in 2019.

U.S. stocks rose, with the Dow Jones industrial average up over 1 percent at 12:30 p.m. EDT, buoyed also by strong housing and consumer confidence data.

An improved outlook for the job market lifted U.S. consumer confidence more than expected this month, according to a study by industry group The Conference Board. In June, prices of U.S. single-family homes rose for the second consecutive month, Standard and Poor’s reported on Tuesday.


Before the president began a week-long vacation on Sunday, Obama administration officials repeatedly stressed that he would not be making news.

Analysts said the timing of the announcement was shrewd.

“We entered the financial crisis two years ago with an untested Fed chairman. Bernanke has been through the crucible since then,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey.

“Moving into the clean-up phase with another new and untested chairman would have just compounded the uncertainty in the outlook.”

With growing signs the U.S. economy is slowly recovering, thanks in large part to Bernanke’s efforts, the Fed chairman should have little difficulty winning confirmation from the Senate again.

Obama decided to nominate Bernanke a month ago, after consulting Treasury Secretary Timothy Geithner and White House chief of staff Rahm Emanuel, an administration official said.

Lawrence Summers, Obama’s top White House economic adviser and a former U.S. Treasury secretary who had been mentioned as a possible candidate for the top job at the Fed, also recommended Bernanke’s nomination, the official said.

Bernanke was told in the Oval Office last Wednesday.

Obama is counting on Bernanke, a soft-spoken former Princeton University professor, to nurse the economy back to health at a time when unemployment, home foreclosures and bank failures are still mounting.

Bernanke has pushed U.S. interest rates to near zero and flooded financial markets with hundreds of billions of dollars to stem a credit crisis and turn back recession.


Joining Obama in a school hall in the town of Oak Bluffs, Bernanke shook hands with the president before praising his support for a strong and independent Federal Reserve.

“We have been bold or deliberate as circumstances demanded, but our objective remains constant: to restore a more stable economic and financial environment in which opportunity can again flourish, and in which Americans’ hard work and creativity can receive their proper rewards,” Bernanke said.

After the announcement, Obama headed to a golf course for a second straight day on the links.

Obama’s Democrats control the Senate, but Bernanke, a Republican, has faced criticism from lawmakers in both parties who say he has gone too far in extending Fed support that will be difficult to unwind, threatening future inflation.

Senate Banking Committee Chairman Christopher Dodd vowed a “thorough and comprehensive” hearing to consider Bernanke’s nomination. But he appeared to endorse a second term for the Fed chairman, saying he was “probably the right choice.”

Senate Majority Leader Harry Reid said Bernanke’s renomination sent the right signal to financial markets and he expected the Senate to reconfirm him.

The other main candidate had been Summers, the president’s close economic adviser. That choice could have been seen by many as threatening the Fed’s independence and would also have broken up what Obama sees as a successful economic team.

Bernanke, appointed by President George W. Bush, is widely respected as a top scholar on the Great Depression.

He essentially rewrote the rule book of central banking by creating a host of innovative lending programs to unfreeze credit markets. Now, the Fed faces the challenge of unwinding its extraordinary support for the economy.

Additional reporting by Tim Ahmann in Washington; Editing by Simon Denyer

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