Bernanke gets second term reward from Obama

Hugo Duncan
25 Aug 2009

Bank of England governor Mervyn King this evening formally congratulated Ben Bernanke on his reappointment as chairman of the Federal Reserve.

Barack Obama earlier showered his central bank guru with praise as he announced Bernanke would serve for a second term in what is widely seen as the world's most powerful financial job.

King added to the plaudits, saying: “I am delighted to learn of Ben Bernanke's renomination.

“Since he became chairman, we have worked closely together, in conjunction with other central banks, and I look forward to continuing that relationship.

“Ben brings strong leadership to the Federal Reserve at this vital time.”

The President said Bernanke "led the Fed through one of the worst financial crises that this nation and this world have ever faced".

The decision to hand Bernanke a second term was welcomed on both sides of the Atlantic although critics still claim he failed to recognise the severity of the financial crisis and was too slow to act.

Bernanke oversaw the collapse of Lehman Brothers in September last year which triggered financial and economic meltdown around the world.

But the White House eventually decided that Bernanke - like those banks he did help to save - was too big to fail.

Obama said: "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. But because of his background, his temperament, his courage, his creativity, that's exactly what he has helped to achieve."

Bernanke, 55, slashed US interest rates to almost zero and pumped $1trillion into the banking system to unfreeze the credit markets.

He must now guide the world's largest economy back to growth and reduce unemployment after the worst recession since the Great Depression.

Chris Rupkey, an economist at the Bank of Tokyo-Mitsubishi, said: "Wall Street can rest a little easier now. Having a new chairman come in at this late date would put the Fed-engineered solution to both the recovery and the exit strategy at risk."

Senator Christopher Dodd, the Connecticut Democrat who runs the Banking Committee, said: "Bernanke was too slow to act during the early stages of the foreclosure crisis, but he ultimately demonstrated effective leadership and his reappointment sends the right signal to the markets."

Brad DeLong, a Treasury Department official under President Bill Clinton, said: "He has made only one big mistake: buckling under pressure from all those yelling at him for not finding a way to take over Lehman Brothers and he is not going to make the same mistake again."

Bernanke will still face tough questioning from lawmakers who claim he did not do enough to protect US consumers while bailing out reckless financial firms.

He was appointed by President George W Bush to succeed Alan Greenspan and his first term ends on 31 January. Obama added: "The actions we have taken to stabilise our financial system have all been steps of necessity, not choice. They have faced plenty of critics.

"But taken together, all of these steps have brought our economy back from the brink. They are steps that are working."