President Barack Obama’s administration is scrambling to save the nomination of Federal Reserve chairman Ben Bernanke as more opposition emerges from members of the president’s own party.
Two Senate Democrats announced they would vote against Bernanke’s bid for a second term on Friday, underscoring a major populist shift in the political landscape after a Republican’s stunning Massachusetts victory ended the Democratic supermajority in the Senate.
The embattled chief’s fate spilled over into Wall Street, contributing in part to a three-day slump of nearly five percent spurred by renewed fears over the economic outlook, a tougher White House stand on banks and financial market regulation and worries over China’s overheating economy.
But Obama is confident the Senate will confirm Bernanke, a White House spokesman told reporters traveling with the president en route to Ohio.
“The president has a great deal of confidence in what chairman Bernanke did to bring our economy back from the brink,” deputy White House spokesman Bill Burton said.
The comments came as senators Barbara Boxer of California and Russell Feingold of Wisconsin joined the growing ranks of lawmakers saying they will vote against Bernanke, whose term is up January 31, over sharp criticism of his role in the global financial meltdown.
“Under the watch of Ben Bernanke, the Federal Reserve permitted grossly irresponsible financial activities that led to the worst financial crisis since the Great Depression,” Feingold said in a statement.
Boxer criticized Bernanke for supporting policies of former president George W. Bush that “led to the current economic crisis,” and insisted that the next Fed chief “must represent a clean break from the failed policies of the past.”
As many as 10 Democrats are thought to oppose Bernanke, along with several Republicans.
Yet by late Friday, Senate Democratic Majority Leader Harry Reid issued a statement supporting Bernanke, hinting that Democrats may still manage to secure the 60 votes necessary to block any Republican parliamentary delaying tactics.
“Conventional wisdom rarely credits those who averted disaster, but that’s precisely what chairman Bernanke did,” Reid said, noting his support “is not unconditional” and that he would hold Bernanke to his pledge of “transparency and accountability.”
Independent Senator Bernie Sanders, one of Bernanke’s chief critics, said getting rid of him would be an opportunity to rewrite rules for the financial system.
“A new Obama appointee could transform the Fed into an instrument for the middle class of this country rather than high-rolling Wall Street executives,” Sanders said.
No vote has yet been scheduled in the Senate, but administration officials said Treasury Secretary Timothy Geithner and Obama’s chief of staff Rahm Emanuel were working to secure enough votes for the nomination.
The opposition highlighted deep national worries about the economy as a dominant theme ahead of November mid-term elections. Bernanke’s most vocal critics charge he has coddled Wall Street and turned a deaf ear to Main Street.
Analysts said tossing out Bernanke could trigger new turmoil in financial markets.
“I think what is going on now is that politicians feel that Fed bashing and bank bashing is the way to get back into favor with the American voters,” said Nariman Behravesh, chief economist at IHS Global Insight.
“If he is not reappointed I think the markets would have a fit… This is a time when there is still a fair amount of uncertainty but one area of certainty is that there is a steady hand on the helm at the Federal Reserve.”
Time magazine named Bernanke its 2009 “Person of the Year” in December, crediting him with helping guide the United States through financial turmoil.
Although many economists agree that his efforts eased the impact of the worst crisis in decades and likely averted a new Great Depression, a number of lawmakers blame Bernanke for failing to stop the housing and credit bubble that led to the crisis.