Talk about a case of bad timing. The economic outlook is anything but certain and Federal Reserve Chairman Ben Bernanke’s term was just about to expire. A growing number of senators were less than thrilled with Bernanke’s handling of the economy over the last two years and threatened to deny him confirmation for another term. Sen. John McCain (R-AZ) said that Bernanke “must be held accountable for many of the decisions that contributed to our financial meltdown.”
Nonetheless, on Thursday, the Senate voted 70-30 to reappoint Bernanke for a second four-year term. The Senate has never rejected a Fed chairman nominee, though Bernanke received a record-low vote total. Sen. Robert Menendez (D-NJ) said, “To vote against confirmation could unnerve investors and exacerbate economic uncertainty in the marketplace, which is exactly what we do not need at this time.” He was probably correct, though we also think McCain has a point. It was Bernanke and former Treasury Secretary Henry Paulson, who, along with Democrats in Congress, were largely responsible for steering the economy into a ditch. Yet sacking Bernanke likely would have destabilized the market — much like Barack Obama’s populist posturing about bank punishment did last week.
Furthermore, if it’s not Bernanke, then who? There’s little chance Obama would have chosen someone satisfactory to succeed him. The one name that surfaced was former Clinton Treasury Secretary Lawrence Summers. In the end, the Senate simply went with the known quantity.