WRAPUP 1-U.S. Senate to vote on Bernanke Thursday, approval seen

* Senate looks set to clear hurdle to Bernanke nomination

* Final confirmation vote might take place on Thursday too

* Reuters poll shows Bernanke likely to clear vote

By Mark Felsenthal

WASHINGTON, Jan 28 (BestGrowthStock) – Federal Reserve chief Ben
Bernanke’s nomination for a second term running the world’s
most powerful central bank faces a decisive day in the Senate
on Thursday when his confirmation vote looks set to go ahead.

Bernanke had been widely seen as getting the support he
needs but a recent surge of public anger at big banks and the
way U.S. regulators rescued them from the financial crisis has
meant the vote could be a lot closer than expected.

Praised by economists and investors for the Federal
Reserve’s unprecedented response to the financial crisis,
Bernanke has not escaped criticism for failing to see the
crisis as it brewed.

President Barack Obama and allies in the Senate Democratic
leadership were forced to intervene over the past week to press
senators to get the 60 vote super-majority needed to overcome
efforts to block the nomination of Bernanke.

Polls show that majority now looks likely.

“The political neutral and independent Fed has really been
politicized this week, probably to its detriment,” said Chris
Krueger of Concept Capital, a private firm that tracks
Washington for institutional investors.

A procedural vote has been set for Thursday to clear any
roadblocks, a sign that Senate leaders feel they have the 60
votes needed.

Clearing the hurdle would start the clock on up to 30 hours
of debate on the nomination, although Senate aides said on
Wednesday they expected the final confirmation vote would take
place on Thursday.

Bernanke’s term expires on Jan. 31.

The election last week of a Republican to a Massachusetts
U.S. Senate seat long held by Democrats underscored the anger
among voters over Wall Street bank bailouts, in part designed
by Bernanke, and the weak economy.

The result shocked Washington. A number of senators facing
tough re-election battles in November voiced their opposition,
raising doubts about whether Bernanke could be confirmed, which
sent global stock markets lower.

President Obama contacted senators over the weekend and
Bernanke now looks set to be confirmed, officials say.

However, he may garner the fewest “yes” votes for any
nominee to be Fed chairman in the 32 years that the Senate has
been playing a role in approving the nominations.

Paul Volcker, who triggered a back-to-back recession with
sky-high interest rates in order to kill inflation, currently
holds that honor with 16 “no” votes in 1983.

POLL SHOWS SUPPORT FOR BERNANKE

A Reuters poll showed 50 Senators support Bernanke and 21
oppose him. The rest of the 100-member chamber is undecided or
undeclared.

If confirmed, Bernanke will lead a Federal Reserve that has
been reshaped by financial crisis, a recession and the shifting
politics that ensued.

His biggest task in coming months will be to decide when
and how to eventually dismantle or “exit” emergency measures
that he helped put in place, without stunting the fragile
economic recovery or alarming financial markets.

In another sign of how public outrage over the recession
and expensive bank bailouts is dominating Washington ahead of
November’s mid-term elections, Treasury Secretary Timothy
Geithner was lambasted by lawmakers on Wednesday over the 2008
public bailout of insurer American International Group.

That anger could translate into new moves in Congress to
strip the Fed of its direct supervisory power over banks or its
responsibility for protecting consumers.

Congress might also mandate much more extensive supervision
of the Fed including its emergency lending and possibly even
monetary policy decisions.

In considering Bernanke’s nomination, some lawmakers
pressed him to do more for the economy, highlighting the
unusually high degree of political pressure now on the Fed.

The Fed guards its independence jealously and is more
likely to respond to the political mood by pushing forward on
consumer-friendly regulatory initiatives than by steering
monetary policy in a direction palatable to lawmakers.

Ethan Siegal of The Washington Exchange — a private firm
that tracks Congress and the White House for institutional
investors — said he expects Bernanke to steer his own path.

“I think Bernanke is going to be under a lot of pressure
from the liberal and populist side of the Congress to keep
(interest) rates low and not to withdraw any of the help that
the Fed provided the economy,” Siegal said.

“But I think Bernanke is going to do what he thinks is the
best thing for the overall economy.”

At a policy meeting that ended on Wednesday, the Fed
renewed its pledge to hold benchmark interest rates at
exceptionally low levels for a long time to support a fragile
recovery. [ID:nN27180815]

With unemployment in the double digits, the Fed will face
increasingly difficult decisions later in the year about when
to raise interest rates as the recovery gains steam.

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WRAPUP 1-U.S. Senate to vote on Bernanke Thursday, approval seen