WASHINGTON — With just three days remaining in his term, the Senate voted 70 to 30 on Thursday to give Federal Reserve Board Chairman Ben Bernanke another four years at the helm of the central bank.
The vote capped a battle that began in August when President Obama decided that Bernanke's aggressive and unconventional response to the financial crisis earned him a second term. But the decision provoked a firestorm on Capitol Hill in recent weeks as critics from both parties argued Bernanke was a lax regulator, ignored consumer protection and kept interest rates too low.
The resistance to Bernanke raised the possibility that he would not attract the 60 votes necessary to ward off filibuster threats. After intense lobbying from the White House, Bernanke ultimately won 77 supporters during an initial cloture vote, allowing the Senate to move forward with the confirmation vote.
Still, the debate over Bernanke — and the proper role of the Fed — was on full display in floor debate on Thursday.
"I believe that it is the duty of this body to hold accountable those regulators whose poor oversight of our financial institutions and markets helped produce the greatest economic crisis this country has experienced in 80 years," said Sen. Richard Shelby, R-Ala., the Banking Committee's top Republican.
But other Republicans came to Bernanke's defense. Sen. Judd Gregg, R-N.H., said if it were not for Bernanke's "out of the box" decisions to increase liquidity and calm markets, ordinary Americans would have found their lifestyles greatly changed.
"The way he did it was extraordinary in its creativity and the results were the country's financial system did not collapse," Gregg said.
The confirmation also divided Democrats. Banking Committee Chairman Chris Dodd, D-Conn., said it would be "a great error indeed if we were to reject this nomination."
Reconfirming Bernanke would "provide the confidence and stability that our markets demand if this economy, as fragile as it is, is going to continue to get back on its feet again," Dodd said. "To do otherwise, I think, would do great damage to our nation at this critical moment."
But Sen. Jeff Merkley, D-Ore., said Bernanke's "decisions" as Fed chairman and in prior positions with the Bush administration "helped set the fire that destroyed our economy."
"Now we need to rebuild our economic house. That takes an architect. Not a fireman," Merkley said.
Bernanke took office in 2006 amid booming profits in the banking sector and a broader economy that showed no signs of slowing. He initially responded to volatility in financial markets by reducing the charge to borrow from the discount window and allow banks more time to repay their loans.
As the financial crisis grew, so did Bernanke's response. He launched programs that pumped cash and Treasury securities into financial institutions, opened the discount window to investment banks, bought commercial paper from companies well beyond the banking sector and helped support money market mutual funds.
But Bernanke has lived to regret congressional testimony in March 2007 where he said problems related to subprime mortgages were "contained." His reputation has been marred by his association with the rescue of American International Group Inc. and support of the politically unpopular Troubled Asset Relief Program.
In floor debate on Thursday, several senators appeared genuinely conflicted on how to vote. Some said their opposition was tempered by the fact that Bernanke's steps did avert a catastrophe; others said despite supporting him they had significant concerns about his record.
Arizona Republican Jon Kyl outlined a host of complaints about Bernanke, including that the Fed's "lax monetary policy" helped spur the housing bubble. But ultimately, he added, choosing Bernanke is the lesser of two evils if the administration selects a more liberal successor.
"These are all reasons to oppose his … confirmation," Kyl said. "Nonetheless, I must vote for Chairman Bernanke simply because I'm concerned that any other nominee chosen by President Obama would likely be less independent than Chairman Bernanke and would direct the Federal Reserve's resources to support the administration's policy interests."
Sen. Kay Bailey Hutchison, a Texas Republican who voted against Bernanke in committee, also indicated her decision was a difficult one. She lauded his containment of the crisis, but criticized the central bank's extraordinary use of resources to bail out financial institutions and said she would oppose the confirmation.
"While I commend him for" stemming catastrophe "I am very concerned by some of the precedent that has been set in the crisis," she said.
Some supporters noted that Bernanke has admitted he made some mistakes.
"He has acknowledged that he has many lessons to learn from the crisis and he is working hard to make sure they are not repeated in the future," said Sen. Charles Schumer, D-N.Y.
But Sen. Barbara Boxer, D-Calif., whose opposition announcement last week sent Democratic leaders scrambling for votes, said she could not condone Bernanke's missing the impact of the housing debacle on the broader economy.
"Chairman Bernanke underestimated vastly the dangers of the housing bubble and unconstrained subprime lending," she said. "This is what he said in May '07: 'We believe the effects of the troubles in the subprime sector on the broader housing sector will likely be limited. …' That is Mr. Bernanke in '07. That is hard for me to look at and say that we should vote to confirm him."
