Markets Pleased With Bernanke’s Confirmation

Financial markets around the globe are celebrating the confirmation of Fed Chairman Ben Bernanke for another four year term. Prior to the confirmation the dollar rose in currency markets as the news emerged that Bernanke was likely to win senate confirmation. Yuzo Sakai of Tokyo Forex & Ueda Harlow stated; “The news prompted dollar-buying as there’s no adequate person who has (Bernanke’s) abilities.” The dollar rose after comments by White House officials and Republican Senator Mitch McConnell who said that Bernanke’s confirmation would garner senate approval. Last Thursday the senate voted to confirm Bernanke 70-30.

Fed to Retain Independence

Many saw the confirmation of Bernanke as a sign that the Fed may remain free of congressional meddling and that the central bank would remain independent. Dan Fuss of Loomis Sales stated; “This is very good news. It gets rid of probably the biggest worry of all for many investors, particularly foreign investors. They’ve been worried because they see Congress starting to interfere with the independence of the central bank. And the conclusion they draw, and me too, is, ‘There goes the currency, the dollar.’ You trust the central bank or you don’t. This confirmation takes that that uncertainty away for many.” The Fed was created in 1913 after several bank panics and is supposed to be apolitical but traditionally when the economy is bad the Fed chairman is blamed.

Opposition and Support

As if to confirm the politicization of the Fed Bernanke opponent Richard Shelby of Alabama, the senate’s leading Republican stated, “Bernanke fiddled while our markets burned. Ben Bernanke’s Federal Reserve played a key role in setting the stage for the financial crisis.” Many regard Shelby’s statement as political posturing. Bernanke’s opponents blame him for failing to spot the irregularities that led to the financial crisis and lax bank regulation. Bernanke supporter Chuck Schumer said that the partisan fight over the confirmation would send “the message that the Federal Reserve and its monetary policy decisions are under the thumb of Congress. Businesses will be faced with the prospect that the Fed might not be able to do what’s necessary for the economy because of pressure from Congress.”

Rates to Remain Low Says Fed

Many investors see Bernanke’s biggest upcoming task as devising exit strategies from the emergency measures taken by the Fed at the start of the financial crisis. Despite speculation to the contrary the Fed said after a two day meeting last week that rates would remain “exceptionally low” for “an extended period.”