Markets and economists welcome Bernanke nomination

NEW YORK - Markets and economists gave a hearty welcome to the reappointment of Ben Bernanke as chairman of the Federal Reserve, after President Barack Obama plumped for continuity over picking his own man for the most important job in finance.

Announcing that Bernanke will be nominated for a second four-year term, the President lavished praise on the Princeton University academic's "temperament, courage and creativity" as he had battled the worst financial crisis since the Great Depression.

And there was a swipe against political critics of the Fed and its chairman, many of whom are arguing that the central bank's unprecedented interventions to shore up markets overstep its authority and that it should not be handed new powers under Obama's plan to overhaul financial regulation.

"Even though there is some resistance on Wall St from those who prefer things the way they are, we will pass the reforms necessary to protect consumers, investors and the entire financial system," the President said.

"And we will continue to maintain a strong and independent Federal Reserve."

Coming alongside more positive economic data, the announcement contributed to an 80-point jump on the Dow Jones Industrial Average in Wall St morning trading.

The Fed has pumped hundreds of billions of dollars into the credit markets and designed numerous schemes to guarantee private debt and help small businesses and consumers to get loans, so any sudden changes in policy or personnel at the Fed could have big consequences for markets.

Mervyn King, Governor of the Bank of England, said he was "delighted" and that a partnership the two men forged as fellow academics at MIT "has stood us in good stead in dealing with the crisis".

Jean-Claude Trichet, of the European Central Bank, said: "The Federal Reserve and the ECB have, together with other central banks, initiated an unprecedented level of close co-operation which has been key in coping with the present situation."

Critics of Bernanke said he had been slow to realise the economic and financial implications of the collapse in the housing market and the dislocations in the credit markets that began in 2006 and 2007.

Others worry that he may have been too closely associated with the massive injections of liquidity into credit markets and that he will risk inflation by waiting too long to pull it back when the economy recovers.

The chairman countered some of those critics alongside Obama yesterday: "If confirmed by the Senate, I will work to the utmost of my abilities to help provide a solid foundation for growth and prosperity in an environment of price stability."

- INDEPENDENT