FED FOCUS-Weak growth,miscues may put Bernanke's job at risk

FED FOCUS-Weak growth,miscues may put Bernanke's job at risk

Mark Felsenthal and Tamawa Kadoya
Reuters North American News Service

Jan 29, 2008 10:22 EST


WASHINGTON/NEW YORK (Reuters) - Federal Reserve Chairman Ben Bernanke's job rides on protecting the U.S. economy from the worst of the fallout from housing and financial market turmoil, but politics and a few missteps could determine if he wins another term.

Bernanke's four-year term as chairman expires on Jan. 31, 2010. The next president, who will take office in early 2009, may consider whether to tap someone else to lead the Fed.

While highly regarded as an economist and praised for his efforts to demystify the U.S. central bank, Bernanke's first two years in office have been dotted with controversy. Lately, he has faced a storm of criticism for his handling of a financial crisis that burst into public view in August.

"They have contributed to the volatility," said Richard Gilhooly, fixed-income market strategist at BNP Paribas in New York. "Much of the fear of recession is based on a confusion, a lack of understanding and a lack of confidence in the policy that is being administered by the Federal Reserve."

As stocks at home and abroad tumbled in the early weeks of the new year, the Fed surprised financial markets on Jan. 22 with an interest rate cut of three-quarters of a percentage point. The cut, which came a week before the Fed's next scheduled policy meeting, left the benchmark federal funds rate at 3.5 percent.

The Fed's policy-making Federal Open Market Committee is expected to lower interest rates by at least another quarter point at a two-day meeting ending Wednesday -- just a day before Bernanke reaches the halfway point in his term as chairman.

TURNABOUTS

Ultimately, Bernanke's success in guiding the Fed will be judged on how short and shallow any U.S. downturn is and whether a recovery is on solid footing by early next year.

But a series of stumbles dating back to the beginning of his tenure may build a case against his reappointment.

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http://talkingpointsmemo.com/news/2008/01/weak_growth_miscues_may_put_be.php

then Greenspan deserves the death penalty or at least a very long prison term.