Fed Chief's Future Remains Cloudy as Central Bank Meets

President Obama said Tuesday that Federal Reserve Chairman Ben Bernanke had done a good job handling the financial crisis but offered no hints on whether he wanted the central bank chief to stay in his job.

Pablo Martinez Monsivais / ASSOCIATED PRESS Federal Reserve Bank Chairman Ben Bernanke

Bernanke, who was appointed by former President George W. Bush, a Republican, became Fed chair in February 2006. His term expires at the end of January 2010 and financial markets are eager to know whether he will stay.

"He has done a fine job under very difficult circumstances," Obama, a Democrat, said at a news conference. "I'm not going to make news about Ben Bernanke," Obama said to laughter when asked if he wanted the Fed chair to stay in his post after January.

There has been some press speculation that top White House economic adviser Lawrence Summers wants to succeed Bernanke, who has presided over the Fed during the worst financial crisis since the Great Depression.

Obama implied that he didn't consider the Fed blameless in allowing reckless behavior by the financial sector to create conditions for the financial market meltdown that began in 2007, but he said it had done better than other regulators.

"I would say all financial regulators didn't do everything that needed to be done to keep the crisis from happening," Obama told reporters shortly before the Fed began a two-day policy meeting.

"The Fed probably performed better than most other regulators prior to the crisis taking place, but I think they'd be the first to acknowledge that in dealing with systemic risk and anticipating systemic risk they didn't do everything that needed to be done," he said. Obama added: "I think since the crisis has occurred Ben Bernanke has performed very well."

Experts gave a mixed interpretation of Obama's statements on Bernanke, saying the president had left his options open.

"I take it as a positive that he's willing to comment positively on Ben," said Randall Kroszner, a former Federal Reserve Governor and now a professor at the University of Chicago's Booth School of Business.

Jeffrey Frankel, a professor at Harvard University and former economic adviser to President Bill Clinton, said Obama had been deliberately vague.

"It is pretty clear that President Obama's intention was to transmit no information whatsoever regarding whether Bernanke would be reappointed," Frankel said.

Even as Obama mulls whether to keep Bernanke, his administration has proposed giving the Fed authority to monitor large, interconnected financial firms and play a lead role in designating which ones pose "systemic risk" to the economy.

Some lawmakers, including the head of the Senate Banking Committee, are reluctant to give this role to the central bank, which they argue could have done more to prevent the current crisis. Others worry it would give the Fe d too much authority.

Obama indicated he did not believe the U.S. central bank was getting too powerful.

"If you look at what we've proposed, we are not so much expanding the Fed's power as we are focusing what the Fed needs to do to prevent the kinds of crises that are happening again," he said.

He said the Fed had the best technical expertise to be a systemic risk regulator.

"One of the central concepts behind our financial regulatory reform is that there's got to be somebody who is responsible, not just for monitoring the health of individual institutions, but somebody who's monitoring the systemic risks of the system as a whole," Obama said. "And we believe that the Fed has the most technical expertise and the best track record in terms of doing that."

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