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Obama joins lobbying effort for Bernanke

Bolstered by a White House lobbying effort that included the president, Federal Reserve Chairman Ben Bernanke's chances at a second four-year term improved Monday.
/ Source: The Associated Press

Bolstered by a White House lobbying effort that included the president, Federal Reserve Chairman Ben Bernanke's chances at a second four-year term improved Monday, calming a stock market that had grown anxious over the uncertainty of his support.

President Barack Obama championed Bernanke in an interview on Monday as his aides worked the phones to ensure the Fed chairman is confirmed by the Senate.

"He has my strongest support. I think he's done a good job," Obama told ABC News.

"What we need is somebody at the Federal Reserve who can make sure that the progress that we've made in stabilizing the economy continues. I think Bernanke is the best person for that job," the president said.

Senate Majority Leader Harry Reid, D-Nev., expects a confirmation vote by the end of the week, his spokesman said. David Axelrod, a top White House adviser, said Bernanke has the votes to keep his job.

Bernanke's brightening prospects provided the White House with a rare bit of good news amid political upheaval caused by simmering public anger over the economy, joblessness and bank bailouts.

The Federal Reserve, with its power to set interest rates that influence economic activity, employment and inflation, wields extraordinary influence over the lives of millions of Americans. It also plays a crucial role as the country's lender of last resort when banks can't get their money elsewhere.

Bernanke still can count on several "no" votes when the Senate takes up his confirmation. But after a surge of opposition late last week, and with many senators still undecided, the tide appeared to be turning in his favor. Amid the news, the Dow Jones industrial average rose 24 points after losing 552 points over the previous trading days.

Sen. Joe Lieberman, a Connecticut independent, joined Democratic Sens. Max Baucus of Montana, chairman of the Senate Finance Committee, and Dianne Feinstein of California in announcing support for Bernanke's reappointment. Others were quietly falling in line.

"Facing circumstances not seen since the Great Depression, he made a number of critical decisions that brought us back from the brink of economic disaster," Baucus said.

For better or worse, Bernanke has come to embody both the run-up and the response to the financial crisis that peaked in the fall of 2008. Critics blame him for not recognizing trouble signs and for being part of a massive bank bailout; advocates credit him for launching aggressive countermeasures that prevented a financial collapse.

"Chairman Bernanke helped the president and the economic team steer through some very turbulent times in rough waters," White House spokesman Robert Gibbs told reporters during his daily briefing.

Sen. Dick Durbin of Illinois, the second-ranking Democratic leader in the Senate, said that Bernanke acknowledged "mistakes were made" during a meeting at the Capitol between both men. But Durbin said Bernanke also noted that problems that created the crisis predated his government service.

"Putting all this at his doorstep may be going too far," Durbin said.

Durbin said he was initially undecided but concluded "he's the best person for the job." The senator conceded many Democrats are apprehensive and that Bernanke can only win a second term with help from Republican senators.

Complicating Bernanke's reappointment is his need for 60 votes to overcome a procedural hold on Bernanke's confirmation placed by Sen. Bernie Sanders, a Vermont independent who has been one of his leading critics.

But Durbin said even senators who might oppose the Fed chairman say they would not attempt to block his confirmation from reaching the Senate floor. The office of Sen. Sheldon Whitehouse, D-R.I., issued a statement saying he had misgivings about Bernanke but that he "will not join any filibuster of Mr. Bernanke's nomination."

Even as momentum seemed to be shifting in Bernanke's favor, Sen. John McCain, R-Ariz., formally announced his opposition to the Fed chairman. The liberal activist group called on senators to vote against Bernanke in an e-mail to its membership.

"He must be held accountable for many of the decisions that contributed to our financial meltdown," McCain said in a statement.

The market's reaction last week to news that senators were lining up against Bernanke was a strong indication that Bernanke's defeat would rattle Wall Street and financial markets around the world and add new risks to the fledgling recovery. Economists fear that prolonged political wrangling over a successor could increase the odds of the economy faltering and dipping back down into recession.

Bernanke's term expires Jan. 31, and turmoil over his reappointment comes as he and his Fed colleagues begin a two-day meeting Tuesday to gauge the strength of the economic recovery and weigh efforts to wean banks from emergency lending programs.

The Fed is all but certain to keep its key bank lending rate — it affects a wide range of rates on consumer loans — at a record low near zero when the meeting concludes on Wednesday.

It is also expected to renew a pledge to hold rates at record lows for an "extended period" to nurture the recovery. Economists think that means rates will stay where they are for at least six more months.