President Obama on Tuesday nominated Federal Reserve Chairman Ben Bernanke to a second four-year term, praising the central bank chief for "bold, persistent experimentation" to bring the economy back from the brink of collapse.
The president, vacationing on Martha's Vineyard in Massachusetts, made the announcement in a move aimed at continuity as the economy pulls out of recession. It ended speculation that Bernanke might be replaced.
Obama said the Fed chief had approached "a financial system on the verge of collapse with calm and wisdom, with bold action and outside-the-box thinking that has helped put the brakes on our economic free-fall." The renomination requires Senate confirmation.
"The actions we've taken to stabilize our financial system, repair our credit markets, restructure the auto industry and pass a recovery package have all been steps of necessity, not choice. They've faced plenty of critics, some of whom argued that we should stay the course or do nothing at all. But taken together, this bold, persistent experimentation has brought our economy back from the brink. They are steps that are working," Obama said.
The president pointed to signs that the auto industry, business investment and the housing and credit markets are stabilizing, but added that "we are a long way away from completely healthy financial systems and a full economic recovery.
"That's why we need Ben Bernanke to continue the work that he's been doing and that's why I've said that we cannot go back to an economy based on over-leveraged banks, inflated profits and maxed-out credit cards," he said.
Bernanke, 55, a former Princeton University professor, was appointed Fed chairman by President George W. Bush and took office in February 2006.
At Tuesday's announcement, Bernanke thanked the president and said if he is confirmed by the Senate, he would "work to the utmost of my abilities to help provide a solid foundation for growth and stability in an environment of price stability."
The Fed, like other economic policymakers, "has been challenged by the unprecedented events of the past few years," Bernanke said. "We have been bold or deliberate as circumstances demanded but our objective remains constant: to restore a more stable financial and economic environment in which opportunity can again flourish and in which Americans' hard work and creativity can receive their proper rewards."
Bernanke has not been without detractors who say he should have acted more quickly to address the subprime mortgage and derivatives meltdowns. He has also faced criticism from both Democrats and Republicans in Congress who say his massive support to the financial industry will eventually cause a sharp increase in inflation.
In a new term, he will be faced with the difficult task of winding down massive efforts to boost the economy without choking off a recovery. Some critics say that striking that balance could prove impossible.
Even so, Democrats seemed to be lining up behind his continued tenure.
"While I have had serious differences with the Federal Reserve over the past few years, I think reappointing Chairman Bernanke is probably the right choice," Senate Banking Committee Chairman Christopher Dodd, a Democrat from Connecticut, said in a statement.
While Bernanke's job does not appear to be in any real danger, he is likely to be grilled by senators from both parties at his confirmation hearings.
Obama's announcement came on the same day as White House budget director Peter Orszag and economic adviser Christina Romer issued new budget deficit projections. They said the worse-than-expected economic crisis would result in continued high unemployment in the near term and lead to massive deficits totaling $9 trillion over the next decade.
In May, the Obama administration had predicted deficits totaling $7 trillion for 2010-2019. On Tuesday, Orszag and Romer said the economy this year will contract by 2.8 percent, more than twice what they had predicted earlier this year.
Obama hopes Bernanke can help nurse the economy back from recession even as Americans continue to lose jobs in record numbers and the housing market has yet to stage a decisive turnaround.
Meanwhile, Wall Street has given Bernanke high marks and stocks rallied after his renomination was announced, though the rise was attributed more to a better-than-expected August consumer confidence report than the Fed chief's widely anticipated reappointment.
Bernanke's study of the Great Depression is credited with helping him respond to the current crisis with programs to unfreeze credit markets and get banks lending again. He brought interest rates to zero and extended federal loans to struggling financial giant Bear Stearns and insurer AIG.
There had been talk of Bernanke being replaced by Lawrence Summers, the top White House economic adviser and a former U.S. Treasury secretary. That possibility, however, was widely viewed as presenting a conflict of interest for the Fed, which is seen as independent despite the presidential appointment of the chairman.