November 20, 2009 / 7:57 PM / 8 years ago

Senate sets hearing on Bernanke's renomination

WASHINGTON (Reuters) - The Senate Banking Committee said on Friday it will hold a hearing on Federal Reserve Chairman Ben Bernanke’s renomination to a second term on December 3, putting the central bank chief under scrutiny at a time when the Fed is facing intense criticism in Congress.

President Barack Obama nominated Bernanke to a second four-year stint as Fed chief in August, praising his handling of the financial crisis. Bernanke’s first term expires on January 31.

The hearing promises to be lively.

Lawmakers have accused the Fed of being asleep at the wheel as risky lending practices laid the groundwork for the financial bust, which in turn fed the most painful recession since the 1930s. They are also angered at the role the central bank has played in bailing out large financial institutions.

Public resentment against the Fed and the Treasury Department runs high as some banks that received taxpayer funds have returned to profitability even as many Americans still lose jobs and homes.

Some lawmakers are pushing legislation to sharply rein in the Fed’s powers and to subject it to a higher degree of congressional scrutiny.

An amendment approved by a House of Representatives panel on Thursday would open Fed interest rate decisions to congressional review. Fed officials say the step would sap investor confidence in the central bank’s ability to take the potentially unpopular step of raising interest rates to put the brakes on growth to prevent inflation.

Senior Senators of both political parties have faulted the Fed’s actions leading up to and during the crisis. Banking Committee Chairman Christopher Dodd called the Fed’s regulatory performance “an abysmal failure.”

However, Dodd said last month he sees no roadblocks to Bernanke’s reconfirmation, and the Fed chairman had done a very good job, particularly in the last year.

Bernanke took the Fed’s reins in 2006 from storied predecessor Alan Greenspan, who was lauded during his tenure for overseeing the longest-ever U.S. economic expansion.

Bernanke was initially tapped to serve as a member of the Fed’s board by then-President George W. Bush in 2002. He later served Bush as an economic adviser before he returned to the central bank.

Prior to these Washington posts, the former Princeton University economics professor’s only political experience was serving on a local school board.

When the financial crisis hit in mid-2007, Bernanke reacted slowly at first, but then began a series of aggressive steps to cushion the economy and prevent a meltdown of the financial system. The Fed has justified the emergency actions it took as necessary to prevent an even-worse financial collapse.

However, with unemployment currently above 10 percent and a weak recovery on the horizon, many lawmakers are directing their frustrations at the Fed.

Reporting by Mark Felsenthal; Editing by Andrew Hay

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