Concern Over Jobs Endangers Bernanke

Posted January 22, 2010 at 6:04pm

Senate Democrats seeking to shift the political conversation from their loss in the Massachusetts special election last week to jobs and the economy might kick off their efforts by voting down the nomination of Ben Bernanke for a second term as Federal Reserve chairman.

The growing animosity toward Bernanke, whose current term as Fed chief expires Jan. 31, signifies a growing desire among a faction of Senate Democrats to focus on “Main Street— issues, such as unemployment, rather than the concerns of Wall Street.

Bernanke’s potential rejection by the Senate sets up the chamber for a possible showdown with the White House. President Barack Obama came out in support of Bernanke on Friday, and White House Deputy Press Secretary Bill Burton quickly reiterated Obama’s desire for the Senate to confirm the nominee.

“The president thinks he’s the right person for the job and believes that he will be confirmed,— Burton told reporters traveling with the president Friday in Ohio.

Senate Democrats are less confident. Majority Whip Dick Durbin (Ill.), who on Saturday announced that he will vote to confirm Bernanke, indicated Friday how endangered the nomination is and noted his preliminary whip count shows that Republican votes will be needed to confirm him.

“I just think there’s some uncertainty here, and we don’t know from the Republican side whether they’re going to provide votes,— Durbin said. “We will need some Republican support.—

Sen. Judd Gregg (R-N.H.) on Saturday issued a joint statement with Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.), reiterating their support for Bernanke and predicting that he will win confirmation from the full Senate.

Durbin added that Democratic concerns about Bernanke and the direction of the Fed predates the Democratic loss in the Massachusetts Senate special election Tuesday.

Bernanke got some good news Friday evening when Senate Majority Leader Harry Reid (D-Nev.), who met privately with the Fed chairman Thursday, came out in support of the nominee. The endorsement could build momentum among the undecided members of the caucus whose votes Reid will likely need to break a series of holds on the nominee.

“While I will vote for his confirmation, my support is not unconditional,— Reid maintained. “I know Chairman Bernanke is committed to transparency and accountability, and that is why I will hold him to the highest standards of both. The Senate will continue to demand visible and responsible results for the people we represent.—

The uncertainty about whether Bernanke will be approved for a second term comes as Senate Democratic leaders continue scrambling to pass a controversial $1.9 trillion debt-limit hike that has yet to garner the support of party moderates.

“There are a number of balls in the air and none of them have yet been caught,— a Democratic aide said.

Bernanke’s wavering support in the Senate “is definitely a function of the anxiousness that’s being shown in the electorate,— the aide added. “The change that people voted for in November 2008 needs to happen faster, and that’s why you’re seeing the growing number of ‘nay’ votes on Bernanke.—

Sens. Barbara Boxer (D-Calif.) and Russ Feingold (D-Wis.) on Friday joined a growing contingent of liberal Democrats who will oppose Bernanke’s nomination for a second term, sending a warning alarm to the embattled nominee and his supporters.

“Dr. Bernanke played a lead role in crafting the Bush administration’s economic policies, which led to the current economic crisis,— Boxer said in a statement. “Our next Federal Reserve Chairman must represent a clean break from the failed policies of the past.—

Even Democrats who support Bernanke, such as Sen. Mary Landrieu (D-La.), offered their endorsement with the news release equivalent of holding their noses.

“While I am angry with the behavior of Wall Street speculators and firmly believe we should improve how the Fed monitors any potential financial crisis, failing to reappoint Mr. Bernanke would only add turmoil to markets that are just beginning to recover,— Landrieu said.

Even as Obama continued pushing for Bernanke in the final days of the chief’s current term, he acknowledged the growing desire to shift both the focus — and perhaps the personnel — of the White House’s economic policy team.

Obama’s proposal last week to limit the size and scope of the nation’s banks was seen as a direct rebuke to Treasury Secretary Timothy Geithner and top economic adviser Larry Summers. Geithner and Summers have been credited with saving Wall Street, but the pair has been harshly criticized for not addressing the nation’s 10 percent unemployment rate, and their popularity on Capitol Hill has plummeted.

Obama has also recently dispatched Paul Volcker to meet with Members of Congress, and the popular former Fed chief has been making the rounds to reassure anxious Democrats as they ramp up to focus on a jobs package that has been in the works since last year.

Sen. Byron Dorgan (D-N.D.) indicated Friday that Senate Democratic leaders have largely settled on the details of the jobs bill and will likely present it to the caucus this week or next. But as with Bernanke’s nomination, Dorgan acknowledged that Republican support will probably be necessary.

“We hope that there’s a mix of policies that would persuade some on the other side to join us,— Dorgan said. He added that Democrats have reached out to Republicans but that the talks have not been extensive.