IE 11 is not supported. For an optimal experience visit our site on another browser.

Senate panel gives nod to Bernanke

The Senate Banking Committee on Wednesday approved the nomination of Ben Bernanke to be the next chairman of the Federal Reserve, a position seen by many as the second-most influential job in the country.
/ Source: The Associated Press

The Senate Banking Committee on Wednesday approved the nomination of Ben Bernanke to be the next chairman of the Federal Reserve, a position seen by many as the second-most influential job in the country.

The panel, by voice vote, favorably recommended his confirmation to the full Senate. Considered one of the country’s leading economic thinkers, Bernanke is expected to get a positive vote there as well; the timing of when that will happen was still being nailed down.

Sen. Jim Bunning, R-Ky., was the only senator present voicing opposition to Bernanke. Bunning cited concerns that the nominee would be too much in the mold of Greenspan and not sufficiently an independent thinker.

Bernanke, 51, is a former Princeton professor and Fed governor who now serves as chairman of the White House Council of Economic Advisers. Lawmakers and the administration are wasting no time on his nomination because they want him ready to take over when the 79-year-old Alan Greenspan retires Jan. 31 after 18-plus years at the helm.

“Dr. Bernanke is eminently qualified and a superb choice for the nomination of Federal Reserve chairman,” said the committee’s chairman, Sen. Richard Shelby, R-Ala.

The choice of the well-respected Bernanke is seen as a safe one for Bush, whose job approval ratings are at a low ebb.

If confirmed as expected, Bernanke will lead the Fed at a time when the economy faces challenges, including bloated budget and trade deficits and worries about whether the high-flying housing market will crash. There also are concerns about high energy prices and the lackluster jobs market.

The panel vote came just one day after Bernanke offered the committee insights into his thoughts on a wide variety of economic and financial issues during a three-hour hearing on his nomination before the Senate Banking Committee.

Bernanke told senators on Tuesday that if confirmed as Fed chief he will not veer widely from the policies of Greenspan.

And, he sought to assure lawmakers, investors and the public that he would make decisions on interest rates and other matters based on economic considerations, not political ones. “I will be strictly independent of all political influences,” he vowed.

Bernanke also said he would move slowly and seek to build a consensus on the notion of inflation targeting — that is, numerically spelling out acceptable bounds for inflation. That’s one area where he and Greenspan differ. Bernanke supports a numerical inflation target, Greenspan doesn’t.

While Greenspan has argued that inflation targets can restrain the Fed’s flexibility, Bernanke said that would not be the case.

Bernanke would take over at the Fed after serving since June as chairman of Bush’s Council of Economic Advisers. Before that, he had served for three years on the Fed board after a long career as a professor at Princeton specializing in the study of how central banks operate.

Private economists said Bernanke’s performance Tuesday at his confirmation hearing reaffirmed their belief that his selection was the economic equivalent of Bush’s pick of the widely respected John Roberts to be chief justice of the Supreme Court.

“He gave a bravura performance. For people who wondered about his political skills, he certainly answered those questions today,” said Lyle Gramley, a former Fed board member.

Bernanke walked a fine line during the hearing in not taking positions opposed to current Bush administration policy while sticking by his economic writings, which warned of the problems caused by big budget and trade deficits.

And when Democrats tried to pin him down over whether he would support re-imposing budget rules that would require future tax cuts to be paid for, Bernanke said he did not plan to take positions on specific budget proposals.

That was a change from Greenspan, who has said he supports making Bush’s 2001 tax cuts permanent, but only if they are paid for, either by cutting government spending or raising other taxes.

Bernanke continued to endorse setting specific targets for inflation, but he said he would take no “precipitate steps” to put such targets in place.

Greenspan opposes setting specific inflation targets, although the Fed has operated with an informal target of 1 percent to 2 percent on price increases, excluding energy and food, for a number of years.

As he did when Bush selected him Oct. 24, Bernanke told the committee he would “make continuity with the policies and policy strategies of the Greenspan Fed a top priority.”

Bernanke was not pressed to specifically discuss what the central bank will do with interest rates, although many private economists believe that the Fed, which has two more meetings under Greenspan, will keep pushing interest rates higher in an effort to make sure the surge in energy prices does not become embedded in higher overall inflation.