Federal Reserve Board Chairman Ben S. Bernanke’s standing is soaring among global investors, who say the U.S. central bank is outperforming its European counterpart in economic crisis management, a Bloomberg poll shows.
Seventy-one percent now view Bernanke favorably, up from 60 percent three months ago, according to the quarterly poll of 1,097 Bloomberg customers who are investors, traders or analysts conducted Dec. 5-6. That demonstrates broad support for a central banker whose purchases of trillions of dollars in housing and government debt have drawn attacks from Republicans.
“Bernanke’s leadership and sensible optimism are essential during the recovery of the U.S. economy,” says Jennifer Howarth Lima, a respondent to the Bloomberg Global Poll and a fixed-income trader for Banif Investment Bank in Sao Paulo. “His actions reflect that he is encouraged by signs of economic growth, but wary of continued weakness in the labor market.”
President Barack Obama and Treasury Secretary Timothy F. Geithner also are gaining popularity among investors. Obama is viewed favorably by 48 percent of poll respondents, up from 39 percent in September; Geithner is rated favorably by 53 percent, up from 47 percent in September.
Geithner, who with Obama has pressed European leaders for months to take more decisive action on sovereign debt, flew to Germany, France and Italy this week to make the case to national leaders for a stronger response to the debt crisis.
Fed Over ECB
The divergence of investor opinion on the U.S. and European central banks is stark: Almost three-quarters say the Federal Reserve has done a better job than the European Central Bank in handling economic challenges. Only 13 percent rated the ECB the superior performer. Still, Mario Draghi, who took over as ECB president last month, saw his favorability jump to 63 percent from 36 percent in September.
The rising confidence in U.S. economic leaders mirrors a shift in investor assessments of the country’s prospects. Fewer than a quarter of poll respondents now say the U.S. will slip back into recession within a year; less than three months ago, half saw a double-dip on the horizon.
Since the last global poll on Sept. 26, the Standard & Poor’s 500 Index rose 8.43 percent as of yesterday’s close in New York. The economy grew at an accelerated 2 percent rate in the third quarter and the unemployment rate dropped to 8.6 percent in November from from 9.1 percent in September.
During the period, the Fed has mounted its so-called Operation Twist program to buy longer-term securities and sell short-term instruments in a bid to lower borrowing costs and propel economic growth. Bernanke said Nov. 2 that additional monetary stimulus “remains on the table” as an option.
He hasn’t tipped his hand on whether he will press for a third round of bond purchases in a tactic that has been dubbed quantitative easing. The Fed bought a total of $2.3 trillion in bonds in two rounds of quantitative easing from December 2008 until June 2011.
The Fed’s second round of asset purchases drew criticism from Republicans in Congress, including House Speaker John Boehner of Ohio and Senate Minority Leader Mitch McConnell of Kentucky. Texas Governor Rick Perry, who is seeking the Republican presidential nomination, said in August that it would be “treasonous” for Bernanke to pursue further stimulus before the 2012 elections.
Former House Speaker Newt Gingrich, another contender for the Republican nomination, said in a Nov. 9 debate that Bernanke “ought to be fired as rapidly as possible.”
Opposing Bond Purchases
Poll respondents are rooting against another round of quantitative easing, with only 28 percent saying they support more bond purchases next year to stimulate the economy.
A 51 percent majority also says the U.S. could better promote economic growth with austerity measures, which would cut the federal budget deficit, rather than with more fiscal stimulus such as tax cuts or additional spending.
“Government spending is creating far too many distortions in economic asset allocation,” says Josh Kalish, 39, a poll respondent and vice president at Credit Suisse in New York. “By reducing government expenditures we open the door to more efficient and appropriate transactions that will generate growth.”
Six of 10 global poll respondents say the U.S. should raise taxes on the wealthy to close the deficit, an idea backed by Obama. U.S. respondents diverged from their overseas counterparts: 51 percent of U.S investors oppose higher taxes on the rich, while 46 percent are in favor of that; 69 percent of investors in other countries support the idea.
Obama’s popularity is rising in tandem among U.S. and overseas respondents, though he’s still more popular among investors in Europe and Asia. Twenty-nine percent of U.S. investors have a favorable view of the president, up from 17 percent in the last poll, while 59 percent of those overseas have a positive view, up from 52 percent.
Poll respondents see plenty of obstacles confronting the U.S. economy. Chief among them is persistently high unemployment, cited as a “substantial barrier” to U.S. growth by 7 of 10 investors.
Tight bank credit was cited by 59 percent, followed by political gridlock between Democrats and Republicans, cited by 56 percent; the federal budget deficit, 53 percent; and turmoil in the eurozone, 52 percent.
New Banking Rules
Stricter regulation of the financial industry as the Obama-backed overhaul of banking law takes effect was cited by 41 percent; consumers’ efforts to reduce debt loads, 34 percent; lenders’ unwillingness to write-down mortgages to recognize the drop in home values, 29 percent; the Obama administration’s overall regulatory approach, 28 percent; and widening income inequality, 25 percent.
The impact of the Obama administration’s health overhaul law, often cited by Republican presidential candidates as a drag on the economy, didn’t make the top 10 on a list of 13 potential growth obstacles. Twenty-three percent of investors say it is a “substantial barrier.”
Eighteen percent cited China’s manipulation of its currency as a major barrier to U.S. growth. Nine percent picked uncertainty over the outcome of the U.S. presidential election.
While the threat of a financial crisis still weighs on investors, it has receded over the past three months. Thirty-nine percent of poll respondents expect another financial meltdown in the U.S. within five years, down from 45 percent who said so in September. Nine percent anticipate a crisis in the U.S. within the next year, down from 19 percent in September.
‘Prevent Market Shocks’
Though most poll respondents are in the financial-services industry, they expressed support for restrictions to contain a future crisis. Fifty-seven percent back capping the size of U.S. banks to prevent institutions that are “too big to fail.”
“Management of such institutions will have incentives to take big risks, knowing that there always will be a safety net in case their bets would not pay off,” poll respondent Alexander Fingerman, 39, a vice president of BNP Paribas in New York, says in an e-mail. A cap on bank size “allows not only to avoid the guaranteed bailout but also to prevent market shocks when a bank failure (inevitably) occurs.”
Investors are unenthusiastic about prospects for the U.S. housing market. A 45 percent plurality expects housing prices to be little changed in 2012, with 28 percent expecting a recovery and 24 percent a drop.
The Bloomberg Global Poll was conducted by Selzer & Co., a Des Moines, Iowa-based firm. It has a margin of error of plus or minus 3.0 percentage points.