WASHINGTON: Federal Reserve Chairman Ben Bernanke vowed before taking office to follow in the footsteps of his storied predecessor, Alan Greenspan, but he will likely distance himself from the past as he seeks a second term.

After a devastating financial crisis and deep recession that eliminated 7.3 million US jobs and cost taxpayers hundreds of billions of dollars to bail out banks and financial firms, political friends of the Fed seem few and far between.

While his confirmation does not appear in doubt, that popular discontent is likely to translate into aggressive, even hostile questioning when Bernanke testifies before the Senate Banking Committee today in a bid to win confirmation to a fresh four-year stint as Fed chairman.

The panel must approve his nomination before sending it to the full Senate for a vote. His term expires on Jan 31. It is unclear when the panel will act on the nomination.

"My guess is he'll be confirmed, but he'll take a lot of flak," said Allan Meltzer, a professor of economics at Carnegie Mellon's Tupper School of Business in Pittsburgh and an expert on the Fed's history. "We're in a bad period and the public is very unhappy. So that comes out in the Congress."

The tone of the questioning will reflect popular resentment over lavish government aid to some of the most profitable US firms at a time millions of ordinary Americans face job losses and foreclosures.

It will also offer a taste of bitter political battles ahead as Republicans seek to link the country's economic woes to President Barack Obama and his fellow Democrats, with an eye to regaining a majority in one or both houses of Congress in mid-term elections next November.

Fed's role

The confirmation hearing for the soft-spoken former economics professor will be as much about the future of the Fed as it will be about Bernanke himself.

Congress is considering steps that could dramatically curtail the Fed's responsibilities and would subject the Fed to unprecedented oversight from Congress. One measure fiercely opposed by the central bank would allow a congressional watchdog agency to audit the Fed's interest rate decisions.

The central bank's many critics contend it failed to rein in the risky lending practices that fueled the US housing bubble. With the Fed scoring low in polls on trust in public institutions, hitting hard at the central bank may play well among voters of both political parties.

Senate Banking Committee Chairman Christopher Dodd, who is in a tough re-election campaign, may aim to dispel any accusation he is soft on the Fed or financial firms. He has said he is inclined to support Bernanke but has called the central bank's regulatory track record an "abysmal failure."

Dodd is championing a regulatory reform plan that would strip the Fed of its primary bank oversight responsibility, and both Dodd and Democrats in the House want to take away its consumer protection powers.

Bernanke launched a preemptive strike in the debate over the Fed's role in a rare newspaper column, arguing that auditing monetary policy or stripping the Fed of its ability to oversee big banks would impair economic stability.

Reuters

(China Daily 12/03/2009 page16)