The overriding story of 2009 was the economy, so I’m not totally surprised that Federal Reserve Chairman Ben Bernanke, who helped steer the U.S. economy through its darkest days since the Great Depression, was recently named Time Magazine’s 2009 Person of the Year. The magazine said the Federal Reserve chairman's foresight and success at preventing a second Great Depression -- the history that wasn't made this year -- drove its choice. This mild-mannered man has been credited with taking extraordinary measures to prevent the U.S. credit crisis from turning into an economic depression but he concedes that the Fed, among others, failed to spot the crisis before it struck.
Professor Bernanke of Princeton is a leading scholar of economic history and the Great Depression. He knew how the passive Fed of the 1930s helped create the calamity – through its stubborn refusal to expand the money supply and its tragic lack of imagination and experimentation. Republican Bernanke, was first appointed by George W. Bush and reappointed by President Obama, was determined not to preside over Depression 2.0. So when faced with the worst global financial crisis in decades, he conjured up trillions of new dollars and blasted them into the economy; engineered massive public rescues of failing private companies; ratcheted down interest rates to zero; lent to mutual funds, foreign banks, investment banks, manufacturers and others; jump-started stalled credit markets and more. His aggressive steps have exposed him and the Fed as an institution to criticism from all directions. He’s been called “Bailout Ben’, the patron saint of wall street greed, the unelected czar of a fourth branch of government. But Bernanke knows the economy would be much, much worse if the Fed had not taken such extreme measures to stop the panic.
Bernanke has made subtle changes in the Fed since taking over for his predecessor Alan Greenspan. He has pushed for more transparency and clarity. He has worked hard to explain his actions to the public, holding town hall meetings, writing op-eds and testifying before Congress a record 13 times this year.
Now that Obama has decided to keep him in his job, Bernanke has become a lightning rod in an intense national debate over the Fed and its role. A Senate panel approved the nomination of Federal Reserve Chairman Ben Bernanke to run the nation's central bank for another four years. The Senate Banking Committee voted 16-7 to send Bernanke's nomination to the full Senate for consideration. Before the vote, some of his critics poked fun at Time magazine's decision to name him "person of the year" for 2009. Bernanke "may wonder if he really wants to be honored by an organization that has previously named people like Joseph Stalin, Yasser Arafat, Adolf Hitler, the Ayatollah Khomeini, and Vladimir Putin as their Person of the Year.”
Committee Chairman Sen. Christopher Dodd, D-Conn., who voted for Bernanke, argued, "I happen to believe had he and others not acted . . . at a time of critical importance of our country, we'd be looking at a very, very different and far more dire situation in our nation than is otherwise the case." Although the 56-year-old Bernanke appears to have enough votes to win a second term, some senators are lining up against him. They blame him for not spotting problems that led to the financial crisis, failing to protect consumers and supporting Wall Street bailouts. With Bernanke's re-appointment clearing the committee, it now moves to the full Senate for a final vote. The Senate is not expected to vote on his re-appointment until after it reconvenes after a holiday break on January 19. It is expected that Bernanke's re-appointment will face some stiff resistance on the full Senate floor. Some Senators have even flat-out stated that they will try to delay the nomination process for as long as possible. Bernanke's current term expires on January 31.
Ultimately, Time magazine says it selected the Fed chairman because of the immense power he still has to shape the global economy: "The decisions he has made, and those he has yet to make, will shape the path of our prosperity, the direction of our politics and our relationship to the world." Bernanke supporters--and there are plenty of them in the financial community--have long said it's tough to get credit for something that didn't happen. But Time has decided to do just that in naming Bernanke its Person of the Year. Now we wait to see if Congress will sign off on him keeping his job for another four years.