08/25/2009

News / Obama Reappoints Bernanke as Federal Reserve Chairman

By Merle David Kellerhals Jr.
Staff Writer

Washington — Amid the worst economic crisis since the Great Depression of the 1930s, President Obama has reappointed economist Ben Bernanke to a second term as chairman of the U.S. Federal Reserve, the nation’s central bank.

At a press conference August 25, Obama said, “Ben approached a financial system on the verge of collapse with calm and wisdom, with bold action and out-of-the-box thinking that has helped put the brakes on our economic freefall.” Bernanke’s reappointment will have to be approved by the U.S. Senate.

“The actions we’ve taken to stabilize our financial system, to repair our credit markets, restructure our auto industry, and pass a recovery package have all been steps of necessity, not choice,” the president added.

Obama, appearing with Bernanke on the island of Martha’s Vineyard off the Massachusetts coast where the president is vacationing, acknowledged to reporters that the U.S. economy is a long way from being completely healthy or having a full recovery under way. But he pledged to keep working within government to reduce unemployment and help businesses obtain the capital they need to expand as the recovery begins.

Bernanke’s reappointment reassured financial markets and foreign central banks that the United States will continue on the course first charted by Obama and the Federal Reserve to bolster a collapsing financial sector and provide monetary policies to halt a rapidly declining economy. Bernanke led recovery efforts by stabilizing the nation’s largest banks, often with unconventional methods, restoring credit lending, which is central to business growth, and spearheading efforts to alleviate bad debts and loans held by banks that all but halted lending across the United States.

Bernanke expressed his gratitude to Obama for having enough confidence in his decisionmaking to reappoint him to a second term at the Fed, and for his support for a strong and independent Federal Reserve.

“The Federal Reserve, like other economic policymakers, has been challenged by the unprecedented events of the past few years,” he said. “We have been bold or deliberate as circumstances demanded, but our objective remains constant: to restore a more stable financial and economic environment in which opportunity can again flourish and in which Americans’ hard work and creativity can receive their proper rewards.”

He pledged that if reconfirmed by the Senate he would work with the president and Congress to restore the American economy and “provide a solid foundation for growth and prosperity in an environment of price stability.”

Bernanke was appointed as Fed chairman by President George W. Bush and sworn in on February 1, 2006, following Alan Greenspan’s 18-year chairmanship.

Speaking before bankers and economists at the Federal Reserve Bank of Kansas City’s annual economic symposium earlier, Bernanke said that “one very clear lesson of the past year — no surprise, of course, to any student of economic history, but worth noting nonetheless — is that a full-blown financial crisis can exact an enormous toll in both human and economic terms. A second lesson — once again, familiar to economic historians — is that financial disruptions do not respect borders. The crisis has been global, with no major country having been immune.”

One of the Federal Reserve responses was to provide special facilities for lending with the goal of restoring basic functioning in critical financial markets, he said. To take pressure off the U.S. dollar and to keep credit lending from stalling, the Federal Reserve and 12 major foreign central banks created lines of credit, called temporary swap lines, to make funds available to commercial banks, he said.

These measures and efforts by the Group of Seven (G7) finance ministers and central bank governors late last year stabilized the global financial system by preventing the systematic failure of major banking institutions, by making funding and capital available, and by providing necessary deposit insurance and other guarantees to restore the confidence of depositors, Bernanke said.

“This strong and unprecedented international policy response proved broadly effective. Critically, it averted the imminent collapse of the global financial system, an outcome that seemed all too possible to the finance ministers and central bankers that gathered in Washington,” he said.

“The world has been through the most severe financial crisis since the Great Depression. The crisis in turn sparked a deep global recession, from which we are only now beginning to emerge,” Bernanke added.

http://www.america.gov/st/peacesec-english/2009/August/20090825104542dmslahrellek0.3558008.html?CP.rss=true

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