Bernanke, 'bold,' offered anew for Fed

By Christi Parsons and Mark Silva

OAK BLUFFS, Mass. -- President Barack Obama, praising Federal Reserve Chairman Ben Bernanke for resolute handling of the worst economic crisis in decades, said today that he will nominate the appointee of his Republican predecessor for a second term.

Taking a short work-break from his summer vacation, Obama met with reporters at Oak Bluffs, Mass., on Martha's Vineyard this morning to personally announce his decision to nominate Bernanke for another four-year term.

"As an expert on the causes of the Great Depression, I'm sure Ben never imagined that he would be part of a team responsible for preventing another,'' Obama said. "But because of his background, his temperament, his courage, and his creativity, that's exactly what he has helped to achieve. And that is why I am re-appointing him to another term as dhairman of the Federal Reserve.''

The president and the Fed chairman today attempted to present a message of stability in the face of a persisting recession.

"The Federal Reserve, like other economic policy makers, has been challenged by the unprecedented economic events of the last few years... We have been bold,'' Bernanke said in a brief statement after the president's remarks. "If confirmed by the Senate, I will work to the utmost of my abilities... to help find a solid foundation for growth and stability.''

The nomination to another four-year term starting in January is subject to approval by the Senate, where Bernanke is likely to face sharp questions about whether he responded quickly enough to the mortgage crisis or competently led the bailout of financial firms.

But the nomination already has won tentative endorsement by Sen. Chris Dodd (D-Conn.), chairman of the Senate Banking Committee, who says he believes that Bernanke is "probably the right choice" for the job.

"The man next to me, Ben Bernanke, has led the Fed through one of the worst financial crises that this nation and the world have ever faced,'' Obama said today with the Federal Reserve chairman standing alongside him at the Oak Bluffs Scool on Martha's Vineyard where the president and family are vacationing. The two appeared in open-collared shirts and jackets.

"Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and out-of-the-box thinking that has helped put the brakes on our economic freefall,'' the president said. "Almost none of the decisions he or any of us made have been easy. The actions we have taken to stabilize our financial system, to repair our credit markets, restructure our auto industry and pass a recovery package have all been steps of necessity, not choice.''

Bernanke is a scholar of the Great Depression who moved swiftly last fall to avert another crisis in the face of a sudden credit crunch. Bernanke and then Treasury Secretary Henry Paulson convinced the president and Congress to authorize $700 billion for an emergency bailout of failing banks and insurers.

Although he is a Republican appointed by former President George W. Bush, Bernanke has worked closely with Obama's new economic team, and the president decided to re-nominate him to maintain some continuity as the nation appears poised to climb out of the deepest recession in decades.

Bernanke's term expires Jan. 31. Obama has praised the 55-year-old Princeton University economist for his response to the financial crisis, which involved aggressive use of the Federal Reserve's emergency powers.

Obama said at a news conference in June that he thought Bernanke had "done a fine job under very difficult circumstances."

"I think that the Fed probably performed better than most other regulators prior to the crisis taking place, but I think they'd be the first to acknowledge that in dealing with systemic risk and anticipating systemic risk, they didn't do everything that needed to be done," Obama said then. "Since the crisis has occurred, Ben Bernanke has performed very well."

Bernanke has received largely positive reviews from Wall Street as well, and his efforts, along with those of economic officials from the Bush and Obama administrations, are widely credited with preventing a meltdown of the financial system.

Increasing signs that the country's deep recession may be ending also appear to validate the handling of monetary policy by Bernanke and the Fed, which has dropped its key interest rate to near zero and, using the central bank's ability to in effect print money, has pumped billions of dollars into the economy to spur lending. n influential poll of professional economists last month found 80% expected Bernanke to be reappointed.

Obama economic adviser Lawrence Summers, Treasury Secretary Timothy F. Geithner and White House Chief of Staff Rahm Emanuel all advised the president to renominate Bernanke, according to a White House official who spoke on condition of anonymity before the announcement was made. That means that Summers, whom some had seen as a potential replacement, willremain in his role as chairman of the National Economic Council.

"Larry is of course staying, first because no one can do what Larry can as the president's right-hand advisor on the economy," the administration official said, "and because the president wants and needs his whole economic team together."

While Obama has complimented Bernanke on his handling of the financial crisis, which involved using Fed powers to orchestrate the emergency sale of brokerage Bear Stearns Cos. and to bail out insurer American International Group Inc. last year, some lawmakers from both parties have been critical of his performance. They have complained that the Fed is too secretive about whom it provides money to, and they also have balked at Obama's plans to increase the Fed's power to monitor the economy for signs of major systemic risk, part of the administration's overhaul of financial regulations.

Bernanke's policies "have faced plenty of critics, some of whom argued that we should stay the course or do nothing at all,'' the president said today. "But taken together, this "bold, persistent experimentation" has brought our economy back from the brink.''

"Of course, as I have said before, we are a long way away from completely healthy financial systems and a full economic recovery,'' the president said. "And I will not let up until those Americans who are looking for jobs can find them; until qualified businesses, large and small, who need capital to grow can find loans at a rate they can afford; and until all responsible mortgage-holders can stay in their homes.''

Obama also made it clear today that he will continue to press for a health-care insurance initiative facing growing criticism, and other initiatives that he views as essential to economic recovery.

"We will also keep working towards the reform of a health insurance system whose costs and discriminatory practices are bankrupting our families, our businesses, and our government,'' Obama said. "We will continue to build a clean energy economy that creates the jobs and industries of the future within our borders. And we will give our children and our workers the skills and training they need to compete for these jobs in the 21st Century.''

Bernanke has responded to criticism, which includes a push by many in Congress for audits of the central bank, by embarking on a public relations blitz unprecedented for a Fed chairman.

"This is an extraordinary time," Bernanke said in an interview with the Los Angeles Times before a town-hall styled event in Kansas City. "It's important for me to hear from people outside of Washington. And I want to answer the questions that I know people have about the economy, the Fed and the Fed's actions during this crisis."

In rare blunt talk for a Fed chairman, he told senators in March that the AIG bailout, which could total $180 billion, made him "more angry" than any other single episode during the recession. But he said the Fed had no choice but to stabilize the company in September or risk a failure that would have been devastating to the global financial system.

Bernanke, who wrote a book of essays on the Great Depression, has said he used the Fed's emergency powers to prevent a repeat of that disaster.

"I was not going to be the Federal Reserve chairman who presided over the second Great Depression," he said during the Kansas City event.