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Obama To Announce Reappointment Of Bernanke Today.

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Bernanke to Be Nominated for Second Fed Term by Obama

Aug. 24 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, who led the biggest expansion of the central bank’s power in its 95-year history to battle the worst economic slump since the 1930s, will be nominated to a second term by President Barack Obama, said David Axelrod, Obama’s senior adviser.

Obama will make the announcement tomorrow on Martha’s Vineyard, Massachusetts, where he is vacationing with his family, and Bernanke is expected to join him, Axelrod said. The nomination requires Senate approval. Bernanke’s four-year term as chairman expires Jan. 31.

“The president believes that Bernanke has provided extraordinary leadership during the most difficult financial crisis we’ve faced since the Great Depression,†Axelrod said. “As we build our economy that leadership is still needed.â€

Bernanke, 55, slashed the main interest rate almost to zero, pumped $1 trillion into the banking system and led rescues of Bear Stearns Cos. and American International Group Inc. He now must guide the world’s largest economy back to growth and reduce unemployment approaching 10 percent while shrinking the Fed’s balance sheet to prevent a surge in inflation.

“Wall Street can rest a little easier,†said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Having a new chairman come in at this late date would put the Fed-engineered solution to both the recovery and the exit strategy at risk. â€

Tradition of Bipartisanship

Obama, a Democrat, continues a recent tradition of bipartisanship in his decision to nominate Bernanke, a Republican, to a second term.

Bernanke’s predecessor and fellow Republican, Alan Greenspan, served as Fed chief for 18 years while gaining renomination by three presidents, including Bill Clinton, a Democrat. President Ronald Reagan kept Paul Volcker, first selected by Jimmy Carter, for a second term.

The Fed chief faces threats to the central bank’s independence from members of Congress who say he overstepped his authority as he battled a crisis that froze credit markets and led to $1.6 trillion of writedowns and losses at financial firms. Bernanke was criticized as too slow to respond to the housing slump and for calling the crisis “contained†before reversing course in August 2007 and cutting interest rates.

House Legislation

Legislation in the House would subject the Fed’s monetary policy to audits by the Government Accountability Office, a change Bernanke opposes. Under a regulatory overhaul proposed by the Obama administration, the Fed would need the Treasury Department’s approval before invoking emergency powers used in bailouts and loans to non-bank financial institutions.

“It’s easy with hindsight to say he wasn’t perfect, he should have moved faster,†Laurence Meyer, vice chairman of Macroeconomic Advisers LLC and a former Fed governor, said in an interview in Jackson Hole, Wyoming, where Bernanke and other central bankers gathered Aug. 20-22 for an annual retreat.

“Once he did recognize the crisis, he moved extremely aggressively, very creatively and I think you have to take a step back and say that the efforts and the leadership he gave brought the economy back from the edge of the abyss,†Meyer said.

Almost 75 percent of investors surveyed in the first Quarterly Bloomberg Global Poll had a favorable view of the chairman in July. By almost a three-to-one margin, they said Bernanke had earned another four-year term.

“Bernanke is a source of certainty,†said Guy Lebas, chief-fixed income strategist at Janney Montgomery Scott LLC in Philadelphia.

Market Rebound

The Standard & Poor’s 500 Index has risen 52 percent since a recession low on March 9. The S&P lost 38.5 percent last year. Credit markets have also recovered: The London Interbank Offered Rate for three months loans in dollars fell to 0.39 percent on Aug. 24. The rate surged as high as 4.81 percent in October.


Looks like Bernanke is in for the long haul. Good luck Ben, you're gonna need it! :lol:

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Bernanke's Reappointment = Weaker Dollar: Analysts

Published: Tuesday, 25 Aug 2009 | 7:00 AM ET Text Size By: Antonia Oprita

Associate Web Producer

A weaker dollar at least until next year and government intervention in the markets are to be expected as President Barack Obama reappointed Ben Bernanke as Federal Reserve chairman, analysts and investment strategists told CNBC Tuesday.

Obama will interrupt his vacation to make the announcement at 9 am New York time, with Bernanke at his side, a White House spokesman said Monday. Market reaction was muted in Asia and Europe early Tuesday.

"I think we're probably going to see a move away from the US dollar, ultimately Ben Bernanke has pumped $1 trillion into the economy which certainly has inflationary expectations attached to it; it's a great increase to money supply," Timothy Connors, corporate FX manager at Custom House, said.

"Ultimately we are going to see a devaluation of the US dollar on the back of that, Connors added. "Really what we'll see probably is a move away from the US dollar and into more risky currencies like the Australian dollar for example."

Not that a weaker dollar would be necessarily bad news for the US, where Bernanke is hailed by many, including former General Electric [GE 14.20 -0.01 (-0.07%) ] CEO Jack Welch, as a "national hero" for saving the financial system from collapse and averting an economic depression. (GE is CNBC's parent company)

The famed US consumer, who has supported the world economy until before the crisis and makes up 70 percent of the US economy, is scared by the high unemployment, plummeting house prices and mountains of debt and has stopped spending.

What we need to see is that area of the consumer pick up," James Knightley, ING Bank analyst, told CNBC.com. "There's so much stimulus out there, there's hoping it will work."

An extra fiscal package is needed and that is not Bernanke's area, but, if economic activity continues to be weak, there will be pressure on the Fed to provide even more support via its quantitative easing program.

But if the consumer still fails to pick up, the government "would expect to want to see a weaker dollar, to boost trade," Knightley said.

However, the greenback will likely strengthen in the latter part of next year, when the Fed is expected to start raising interest rates, he added.

Interventionist Fed?

Bernanke's reappointment is consistent with Obama's legislative agenda and his views on the role of government in financial markets, Michael Yoshikami, president and chief investment strategist at YCMNET Advisors, told CNBC.com.

"The President's reappointment of Ben Bernanke confirms his perspective that he supports an interventionist Fed," Yoshikami said.

"It's fairly clear the Fed supports more stringent regulation of markets. This action will give some momentum to financial oversight efforts. And we will continue to have in place a chairman that believes in strong policy action," he added.

Slideshow: The World's Safest Banks

But markets are looking beyond Tuesday's appointment for longer-term solutions to the crisis and for a sustainable recovery – and the view is not necessarily pretty.

"We are seeing a statistical recovery, but we have to look at next year, 2010, whether this recovery can actually pull through and there, we have our doubts," said Hans Goetti, chief investment officer at LGT Bank in Liechtenstein.

The real test of Bernanke's policies will come when quantitative easing will end and the economy will have to function without its liquidity IV drip.

"The bad news is that I don't see any change in the way the Fed operates," Alan Capper, managing partner at Pinner Park Investments, said. "I can see the way Trichet is thinking; I can't see the long-term thinking of the Fed."

Check Dollar Rates Here

Bernanke's job is very difficult because the problem with quantitative easing is the supply side, and the exit strategy should take that into account, said Anthony Gibbs, senior gilts broker, at Vantage Capital Markets. Stagflation and a double-dip recession are still high on the list of possible risks, according to Gibbs.

"Down the line I think you're going to see a situation where, if liquidity is taken away, the government's demand for liquidity is going to crowd out everyone else and this is where I see the risk of a double-dip," Gibbs said.

But for Bernanke himself, worries about the medium and long-term should be miles away. He must be "smiling" given the current state of the labor market and how difficult it is to get a job in the US now, Andrew Freris, senior investment strategist for Asia at BNP Paribas Wealth Management, told CNBC.


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Giving Bernanke credit for "saving us from Depression" is like saying thanks to someone who's pissing on your house after setting it on fire.


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Ready and waiting mr president!


Is that for more helicopter drops over Wall Street or the quick get away vehicles for when the masses finally tumble the scams?

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