July 21 (Bloomberg) -- Illinois Representative Judy Biggert was greeted by a Federal Reserve employee in the central bank’s garage when she arrived for breakfast with Chairman Ben S. Bernanke: It was Bernanke himself.

“That was a really nice, inviting way to meet him,” Biggert, the ranking Republican on a Financial Services subcommittee, recalled of the October 2007 meeting. Biggert backs Bernanke’s reappointment while opposing expanding the Fed’s powers to regulate the biggest financial institutions.

The episode illustrates how Bernanke, who was politically untested when the former Princeton University economist was selected in 2005 to replace Alan Greenspan, has worked to build ties with Congress as the White House begins to consider whether to reappoint him. Bernanke, a Republican, today began two days of testimony before Congress on monetary policy.

Bernanke has won praise from top Democratic lawmakers including House Financial Services Committee Chairman Barney Frank and New York Senator Charles Schumer. That support may help his chances of winning a second term and limit political interference with the central bank stemming from public anger over rescues of companies such as American International Group Inc. and Bank of America Corp.

“Watching him up close, he’s steady, he’s calm, he’s knowledgeable,” Senator Charles Schumer, a New York Democrat on the banking panel, said on Bloomberg Television’s “Political Capital with Al Hunt.”

Schumer Commendation

While Schumer said he’s “not going to handicap whether he’d be better or worse than somebody else,” asked if he wouldn’t be disappointed if Bernanke were reappointed, Schumer replied, “He’s done a good job, so I guess that’s right.”

Bernanke wins credit from lawmakers for helping pull the financial system and U.S. economy from the brink of meltdown. The Libor-OIS spread, a gauge of banks’ willingness to lend, has narrowed to 0.31 percentage point, from a record 3.64 points in October. U.S. companies have sold $774.3 billion of bonds, 10 percent more than the record pace set in 2007 as yields fell to the lowest relative to benchmark rates since before Lehman Brothers Holdings Inc.’s collapse, according to data compiled by Bloomberg.

The U.S. economic contraction, while the worst in a half- century, probably slowed to a 1.8 percent annual pace in the second quarter from 5.5 percent in the first three months of 2009, economists surveyed by Bloomberg News estimate. Growth will resume in the second half of the year, the economists predict.

Dodd Critical

Senator Christopher Dodd, the Connecticut Democrat who chairs the Banking Committee, has criticized the Fed in the past several years for not doing enough to prevent the collapse of the housing industry. Alabama Senator Richard Shelby, the ranking Republican, has shown disdain for Fed-backed bailouts and the Troubled Asset Relief Program.

“I have a good relationship with Chairman Bernanke,” Dodd said in an interview. “I’ve enjoyed my relationship with him. But it’s the president’s call.”

“My criticism is more about the institution of the Fed assuming additional responsibilities, not so much the personalities,” said Dodd.

President Barack Obama has declined to comment on whether he will reappoint Bernanke, 55, who was picked by former President George W. Bush. Bernanke’s four-year term ends Jan. 31. The nomination would be subject to Senate approval. Other potential candidates may include Lawrence Summers, director of Obama’s National Economic Council, and Janet Yellen, president of the San Francisco Fed bank.

Wagers on Bernanke

Intrade, a Web site that lets users trade futures contracts for political outcomes, shows a 70 percent chance of Bernanke getting a second term, up from 65 percent yesterday.

Before joining the Fed as a governor in 2002 and serving as Bush’s chief economic adviser in 2005, Bernanke’s public service mainly consisted of two terms on the Montgomery Township Board of Education in New Jersey.

Bernanke “scores very highly on the ‘works and plays well with others,’” said Vincent Reinhart, a former Fed monetary- affairs director who is now resident scholar at the American Enterprise Institute in Washington. Yet, “standing in Congress is never anything you can go to the bank with,” Reinhart said.

‘Political Element’

“He’s shown great political skills,” with the exception of allowing bonuses for executives at New York-based AIG, Frank, a Massachusetts Democrat, said in an interview. “He understands the role of a central banker in a democratic society, that the political element is an important element of it.”

Representative Michael Capuano, another Massachusetts Democrat on the Financial Services Committee, said Bernanke “won my heart” early in his tenure by saying that any tax cuts would have to be balanced with reductions in spending. That broke from what Capuano saw as Greenspan’s favoring of lower taxes. “It’s an acknowledgement that there are two sides of the ledger,” Capuano said in an interview.

Bernanke also impressed some Democrats just after they won control of Congress from Republicans in the November 2006 elections. In a February 2007 speech, he said the trend of increasing disparity in workers’ incomes “remains a major challenge for economists and policy makers.”

Waters ‘Moved’

At a hearing that month, California Representative Maxine Waters told Bernanke she was “extremely moved” by his remarks.

Not everyone has been so moved. Shelby, the Republican who has been one of the top critics of government bailouts, said he had a “good working relationship” with the Fed until the $700 billion TARP was proposed. Charlotte, North Carolina-based Bank of America, the biggest U.S. lender, received $45 billion in aid under the program. Citigroup Inc., based in New York, also got $45 billion.

“I like Bernanke personally,” Shelby said in an interview. “But I have deep reservations about some of the Fed’s actions, especially in the regulatory field.”

Other Republicans are in Bernanke’s corner. Senator Judd Gregg of New Hampshire, the top Republican on the Budget Committee, said the Fed chief has made “aggressive, bold and difficult decisions” and deserves reappointment. California Representative John Campbell, who’s on the financial services panel, said Bernanke is “almost the perfect guy for the job right now,” and other choices may show less independence from the White House.

Stripping Power

Biggert, a six-term member from suburban Chicago, says she favors Bernanke’s reappointment. At the same time, Biggert helped craft a Republican proposal to strip the Fed of bank- regulation powers and signed on to a bill to audit the Fed’s monetary policy, two changes opposed by Bernanke.

Biggert said she backed the Fed audit bill to get more information on its financial-rescue actions and doesn’t support encroaching on the central bank’s monetary policy. That part would probably be modified if the bill were to advance in Congress, she said. Bernanke said in his House testimony today that such audits might lead to higher interest rates and “reduced economic and financial stability.”

After Biggert discussed topics including credit-card regulation and the Great Depression with Bernanke in his fifth- floor private dining room, Bernanke accompanied her back down the elevator to her car. “It was embarrassing,” because the car she arrived in, her chief of staff’s, was dusty and needed a wash, Biggert said.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.

Last Updated: July 21, 2009 15:28 EDT