Bernanke Wins Second Term As Fed Chief
ARI SHAPIRO, Host:
This is MORNING EDITION from NPR News. I'm Ari Shapiro.
STEVE INSKEEP, Host:
And I'm Steve Inskeep. Good morning. This morning's news of stronger growth in the economy comes right after news that the chief steward of our economy managed to keep his job. Ben Bernanke's first term as chairman of the Federal Reserve was set to expire over the weekend. Last night, the Senate did vote to give Bernanke a second term.
Unidentified Woman #1: The ayes are 70, the nays are 30. The nomination is confirmed.
INSKEEP: OK, 70 to 30, that's a comfortable-sounding vote, but it's actually the smallest margin ever given to a chairman in the history of the Fed. We're going to talk about this and more with David Wessel, the economics editor of the Wall Street Journal and a regular guest here. David, good morning once again.
DAVID WESSEL: Good morning, Steve.
INSKEEP: I suppose we should remind people that not long ago, there was talk the Senate might even reject Bernanke as Fed chairman. What happened to him?
WESSEL: Right. A week ago, there was talk that he might not make it. There was an enormous amount of pressure from the White House, from the Treasury, even from some business executives. Senator Nelson of Nebraska got a call from Warren Buffett, the legendary investor, and that turned him around.
And I think there was a sense in the Senate that the markets, the world, would be shaken up if they rejected Bernanke, so they eventually got enough votes to get him through.
INSKEEP: And let's remember why 70-to-30 seems like a small margin for a Fed chairman. This is supposed to be the guy who is above politics, who is someone that everybody trusts, who is the guru of the economy. And so when you have any opposition to a Fed chairman, people feel troubled about it. Why has his stock fallen, so to speak?
WESSEL: Right. He got more no votes - 30 - than Paul Volcker did back in 1983, when interest rates were very high. Volcker got only 16 no votes.
But I think what happened here was that there's a great deal of anger now that the worst of the crisis has passed. And congressmen, senators and the public in general want to blame somebody for this. Mr. Bernanke is a convenient target. After all, he joined the Fed in 2002 in the Greenspan years, when some of the seeds of this crisis were sown.
I think that there's a sense out there in America that Wall Street got bailed out and Main Street didn't, and Bernanke is a target of that because he was one of the people that organized the rescue.
INSKEEP: You wrote a book, David, called "In Fed We Trust" that creates a different image of Ben Bernanke, though - more of a hero, making hard decisions in a crisis.
WESSEL: That's right. Well, I think that, you know, the crisis has passed, and people want somebody to take the blame, and he's one of the people taking the blame. I think also we saw yesterday in the Senate there's - unhappy with his current approach to things.
But there's a great deal of difference among the critics. People on the left say he's not doing enough, not doing enough about credit card rates, about home mortgage foreclosures and so forth; and people on the right saying just the opposite - he's done so much that inflation is inevitable.
So I think this is really a reflection of what a bad time he went through and how many extraordinary things the Fed did, exposing itself - exposing to the world, rather, how much power it has. And there's a lot of concerns that it's more power than an institution that's not very democratic should have in our society.
INSKEEP: Well, can Bernanke ignore Congress now that he's got his confirmation?
WESSEL: Absolutely not, and this is one of the things that's causing the most concern in markets. And it's going to make this a very interesting story for the next couple of years.
He's weakened politically as he tries to persuade Congress not to clip the Fed's wings on monetary policy or take away its power over banks. And it leaves markets - domestic and foreign - wondering whether the Fed still has the guts to raise interest rates to avoid inflation. Some people think it might prompt him to be even a little tougher on the economy than - they otherwise be to prove that they still have a spine.
INSKEEP: OK. Is he going to raise interest rates, or do something else here?
WESSEL: He'll definitely raise interest rates. The question is when. The betting is not until later this year.
INSKEEP: And did Ben Bernanke celebrate his confirmation in some way last night, as far as you know, David?
WESSEL: We offered, at the Wall Street Journal, to send over a bucket of Gatorade and pour it over his head, and take pictures.
(SOUNDBITE OF LAUGHTER)
WESSEL: The Fed told us that he was going home to spend a quiet night with his wife, Anna.
INSKEEP: Oh, that's what he told you, but you know that there was a bucket of Gatorade waiting for him at home, actually. That's why he declined; he already had that covered.
David, thanks very much.
WESSEL: You're welcome, Steve.
INSKEEP: David Wessel is economics editor of the Wall Street Journal. And again, Ben Bernanke has been confirmed as head of the Fed for another four years. The Senate vote was closer than normal for a Fed chairman, 70-30.