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Bernanke Takes a Second Journey ‘Through the Fire’: Albert Hunt

The U.S. Senate’s consideration of the health-care plan looked ugly. Some critics have forgotten the legislative process is always messy.

Where senators look far more promiscuous, euphemistically, is in the battle over confirming Federal Reserve Chairman Ben S. Bernanke for a second term. He is likely to be approved with dozens of senators in opposition. The backdrop is posturing, expediency and parochial politics.

To be sure, there are a few principled opponents. Senator Bernie Sanders of Vermont, an independent Democrat, is a socialist who genuinely objects to rescuing big banks. South Carolina Republican Jim DeMint is a turn-the-clock-back-to-the-19th-century conservative with little regard for any federal institutions.

These men would have little company in any principles caucus on this matter.

The politicians are playing games when the stakes are huge. Alan Greenspan and Paul Volcker, Bernanke’s predecessors, one a Republican, the other a Democrat, both said over the weekend that it would be irresponsible to reject the Fed chairman.

“Ben has been through the fire,” Volcker said in an interview. “He’s much better qualified now than he was four years ago, before he went through that experience.”

Miscalculations, Mistakes

No one would argue that Bernanke has been perfect; he made miscalculations and mistakes -- missing the housing bubble and acting slowly to shore up lax regulation -- before and during the deepest financial crisis since the Great Depression. But this conservative Republican economist, first tapped for the job by President George W. Bush, tossed aside ideology and basically got it right, probably saving the global economy from the abyss.

“The first criteria you want in a Fed chairman is a crisis manager; Bernanke did his job,” says Douglas Holtz-Eakin, a Republican economist who was the chief economic adviser to his party’s 2008 presidential nominee, Senator John McCain of Arizona. “It would be a disaster not to confirm him.”

Roger Altman, a prominent Democratic financial figure, sounds the same note.

“Failure to confirm Bernanke would be a giant setback for the credibility of the United States,” says Altman, chairman of New York-based Evercore Partners Inc. and former deputy Treasury secretary under President Bill Clinton. “He is the biggest hero in the rescue of the global financial system and avoiding a repeat of the Great Depression.”

Blow to Markets

It’s widely accepted the financial markets around the world would crater if Bernanke were rejected or withdrew out of frustration.

“People would lose hundreds and hundreds of billions of dollars of worth,” says Indiana Democratic Senator Evan Bayh, a Bernanke supporter. “Why would we want to do that?”

There is no one in financial circles around the world who commands more respect than Bernanke. In this month’s Bloomberg Global Poll of investors, the central bank chief got a two-and-a-half-to-one favorable rating, higher than anyone else, and a clear majority said they were worried about Congress interfering too much with the Federal Reserve.

Still, many Americans from the far right to the far left are angry about the severe economic dislocation and the perception that the rich have been taken care of while average folks are struggling. There is bit of truth and a bit of hyperbole in that anger and anxiety.

Wide Agreement

Nevertheless, the issue here is the chairman of the Federal Reserve. Most economic experts, from the rational left to the rational right, from the academy to Wall Street, favor a second term for Bernanke. The alternative for those on the left isn’t former Labor Secretary Robert Reich or for those on the right, flat-tax advocate Steve Forbes.

Analyzing the rhetoric and record of lawmakers opposing Bernanke indicates such realities are of little matter; it’s about political traction. Not so coincidentally, opponents disproportionately are running for re-election this year.

Senator Russ Feingold, the progressive Wisconsin Democrat, is outraged by the “grossly irresponsible financial activities” of Bernanke’s Fed. This is the same Feingold who nine years ago voted to confirm Bush’s controversial attorney general, John Ashcroft, out of deference to the president’s wishes. Does Feingold believe Ashcroft was more qualified for that post than Bernanke is for the Federal Reserve today?

‘Family Values’

Senator David Vitter, the socially conservative Louisiana Republican, worries about the effect Bernanke’s policies will have “on our children and grandchildren,” and the Fed’s lack of openness and integrity. This is the same self-described “family values” fellow who was linked to a prostitute when she posted her call list online.

Senator Kay Bailey Hutchison has a 16-year Senate record as a sensible mainstream conservative from Texas. She’s running for governor of her state and is trying to woo the political right. Her office says she will vote against Bernanke.

Similarly, California Democratic Senator Barbara Boxer is in a tough re-election. In opposing the nomination, she calls for a “clean break” from the Bush-era policies. It’s President Barack Obama who is renominating the Fed chairman.

There is McCain, facing a conservative primary opponent in Arizona, who has indicated he is leaning against Bernanke. This is the McCain who for years insisted Greenspan figuratively walks on water. Now he’s threatening to ignore Greenspan and Holtz-Eakin, his former economic adviser, who says voting for Bernanke is a “no-brainer.”

‘Crucial’ Leadership

Or consider the journey of Senate Majority Leader Harry Reid. In August, when Obama nominated Bernanke, Reid supported the move. The Fed chief’s leadership, he said has been “crucial as our nation has endured the financial crisis.”

After the loss of a Democratic seat in last week’s special Senate election in Massachusetts, with its populist overtones, Reid said he was undecided. Then, under pressure from the White House, he switched again Jan. 22, saying he would vote for Bernanke while taking swipes at him. The main change from the time he effusively praised him in August is that the Nevada Democrat’s re-election has gotten tougher.

The vote probably will be this week; it’ll be one of those unusual occasions that cuts across ideological and party divides and separates the men from the boys, the women from the girls.

(Albert R. Hunt is the executive editor for Washington at Bloomberg News. The opinions expressed are his own.)

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