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US Federal Reserve Chairman Ben Bernanke - Source: Reuters -
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Federal Reserve Chairman Ben Bernanke has been named Person of
the Year by Time magazine, giving him a high-profile boost as he
tries to fend off proposals that might weaken the Fed's
independence.
The selection puts the mild-mannered Bernanke, a former professor,
in the company of
US President Barack Obama, Pope John Paul II and Russian
President Vladimir Putin, among other prominent world figures the
magazine has picked in past years.
The Senate is considering his nomination to a second term to head
the Fed - the US central bank, and while he is expected to win
confirmation, criticism of the Fed among the public and members of
Congress is at its highest in decades.
The Fed's
role in bailouts of Wall Street has prompted criticism from
both Republicans and Democrats. Some lawmakers are pushing
proposals to curb its regulatory powers and bring the central bank
under more scrutiny.
The Fed worries the proposals will compromise its fiercely guarded
independence.
One poll by Rasmussen Reports this month showed public support for
Bernanke's nomination at a scant 21%, with 41% stating opposition,
but he continues to enjoy support on Wall Street and among many
lawmakers.
"Ben is the person that kept us from going over the edge of the
precipice and into the abyss," said former Fed Governor Lyle
Gramley, now a senior economic adviser at Soleil Securities. He
said the Person of the Year selection could help Bernanke
politically.
Time credited the 56-year-old Bernanke with creative leadership
that helped set the US economy on a path to recovery even as he and
other policymakers remain concerned about the high unemployment
rate of 10%.
Double-digit unemployment is one reason the Fed, which cut
benchmark interest rates to near zero a year ago, on Wednesday
repeated a vow to keep rates exceptionally low for "an extended
period" after it wrapped up a two-day meeting.
"Bernanke ... knows the economy would be much, much worse if the
Fed had not taken such extreme measures to stop the panic," Time
said in its cover story on Bernanke. The magazine noted he had
greatly expanded the Fed's power through his efforts to fight the
financial crisis.
Bernanke steps into limelight
Time's Person of the Year selection, widely watched in US media, is
not meant to be celebratory but rather to focus on a world figure
who has been highly influential in the past year.
Still, the distinction is one that analysts said would probably
help Bernanke, an expert on the Great Depression who succeeded Alan
Greenspan in 2006.
In picking Bernanke, Time passed over runners up including House of
Representatives Speaker Nancy Pelosi and Gen. Stanley McChrystal,
the top US commander in Afghanistan, who riveted Washington for
months with his troop-increase request.
For the first several years of his tenure, Bernanke, known for his
low-key, analytical manner, had a much lower profile than
Greenspan, who was considered a rock star on Wall Street and was
extremely popular with the public during his tenure.
The rising criticism of the Fed has prompted Bernanke to step into
the limelight to a much greater extent than he has before,
including granting an interview to the CBS news magazine programme
60 Minutes and appearing at a nationally televised town-hall
meeting in Kansas City, Missouri.
The US Senate Banking Committee is due to vote on his nomination on
Thursday. His first four-year term as Fed chief expires on January
31.
Obama, a Democrat, said in August he was renominating Bernanke, a
Republican first named to the Fed by President George W.
Bush.
Congress is considering proposals that would strip the Fed of its
regulatory authority over major banks and expose its interest rate
decisions to audits.
The Fed has not faced the same pitch of public acrimony since the
1980s, when then-chairman Paul Volcker's interest-rate increases
aimed at breaking double-digit inflation threw the economy into two
back-to-back recessions.
Gramley, who served under Volcker, said he thinks the anger at the
central bank may now be even greater than it was then.
"Then the problem was the public didn't like high interest rates
but there was an understanding on the part of the public that we
had a terrible inflation problem that had to be defeated," he
said.
Now, Gramley said, "The public doesn't understand why (the Fed) had
to bail out Bear Stearns or AIG."
Douglas Elliott, a scholar at the Brookings Institution, said
there's a good chance the tensions over the Fed will wane as the
economy begins to improve.
But he said the increasingly tough political atmosphere for the Fed
will be watched closely by investors and in countries such as China
that have big holdings of government securities and want to see
vigilance by US authorities on inflation.
"We have a huge amount of foreign investment in our government
securities as well as private securities," Elliott said. "Many
foreigners are very worried that we're going to solve our deficit
problems by inflation."
