Ben Bernanke Nominated for 2nd Term as Fed Chief
RICHARD QUEST, CNN INTERNATIONAL HOST: Ben Bernanke banks a second term at the Fed. Now he has to ensure economic recovery. Is General Motors stalling over Opel? The German government says it needs an answer. It's another glorious day in New York. I'm Richard Quest. I mean business. Good evening. President Obama has re-nominated Ben Bernanke to be chairman of the U.S. Federal Reserve. It might have been expected, but it still was welcome news nonetheless to the markets. Tonight, we look back over the last few years at how Ben has managed this crisis and what the job he now has to do going forward. As long as the Senate confirms the appointment, then Bernanke will be back in the chair. His appointment -- the initial appointment ends in January of next year. For the next four years, he will remain in charge of the most powerful central bank in the world. And he has a particular task to do, not only to ensure the U.S. doesn't go back into recession, but also to make sure that the U.S. economy manages to get back to something resembling stable growth. The president and Mr. Bernanke both know the task at hand.</s>BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The man next to me, Ben Bernanke, has led the Fed through one of the worst financial crises that this nation in the world has ever faced. As an expert on the causes of the Great Depression, I'm sure Ben never imagined that he would be part of a team responsible for preventing another. But because of his background, his temperament, his courage, and his creativity, that's exactly what he has helped to achieve. And that is why I'm reappointing him to another term as chairman of the Federal Reserve.</s>BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE: The Federal Reserve, like other economic policy-makers, has been challenged by the unprecedented events of the past few years. We have been bold or deliberate as circumstances demanded. But our objective remains constant, to restore a more stable financial and economic environment in which opportunity can again flourish and in which Americans' hard work and creativity can receive their proper rewards.</s>QUEST: With Mr. Bernanke's background and expertise in the Great Depression, he might have been thought of being a man perfectly tailored for the job. Now, though, he has other tasks on his agenda. He and the president are staying on the luxury resort island of Martha's Vineyard. But they, of course, have many things on their mind that will prevent them from relaxing too much, as Jim Boulden now explains.</s>BERNANKE: It has been a particular privilege for me to serve with the extraordinary colleagues throughout the Federal Reserve system.</s>JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Tuesday's announcement may have come in the midst of a summer vacation, but Ben Bernanke's time as Federal Reserve chief has been no picnic.</s>BERNANKE: I, Ben S. Bernanke.</s>BOULDEN: Firstly, he had to follow in the footsteps of a legend in 2006, at a time when Alan Greenspan was credited with an unprecedented boom in the U.S. economy. Then Bernanke was tasked with having to clean up the mess of an economic crisis. In 2007, critics pounced when Bernanke made this statement after the American mortgage market started to falter.</s>BERNANKE: We do not expect significant spillover from the subprime to the rest of the economy, or to the financial system.</s>BOULDEN: In fact, the spillover was the worst since the Great Depression. Bear Stearns, Lehman Brothers, AIG, General Motors, the American economic landscape changed forever. So how does financial analyst Todd Benjamin rate Bernanke's first term? (on camera): Think of an old American report card where A is very good and E is failure, where would you give Bernanke for the first three years?</s>TODD BENJAMIN, FINANCIAL ANALYST: Well, look, I think if you're dealing in -- early on in his term, you would probably give him, let's say, a D, all right?</s>BOULDEN: Wow.</s>BENJAMIN: But early on, all right? Because he didn't realize the severity of the subprime crisis. But you know, the job he is doing now, you've got to give him probably a B-plus, and probably at least an A-minus, maybe even an A because he took the economy from the brink, it's getting back on track. The big challenge for Ben Bernanke going forward, I'm not saying the next six months, maybe not even in the next year, but in the next, you know, four years, is going to be his exit strategy. How does he rein in all of this liquidity that they've got out there? Because there is oceans of it.</s>BOULDEN (voice-over): Critics often say the Fed was too interventionist, that the political aims of the White House influenced the Fed. But to anyone who might have wanted Bernanke replaced, supporters say what would have been the alternative? Jim Boulden, CNN, London.</s>QUEST: Lakshman Achuthan joins me now, managing director of Economic Cycle Research Institute. We're going to talk more about exactly what this appointment -- it's hard to know, is it an A? Is it a B-plus? We were just hearing Jim Boulden's report. Some people think he might even have been a C and a D for the early part of his tenure.</s>LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: Yes, well, certainly improving grade. And what we've had here is an emergency room situation, and as an emergency room doctor, the Ben Bernanke Fed has done quite well. They've taken us back from.</s>QUEST: Why.</s>ACHUTHAN: They've taken us back from the abyss.</s>QUEST: I'm going to push you hard on this.</s>ACHUTHAN: Go.</s>QUEST: You're all saying that he has done quite well.</s>ACHUTHAN: Right.</s>QUEST: Surely he has done more than quite well, he has done bloody well.</s>ACHUTHAN: Bloody well. Well, you know, not falling into the abyss is a start. And doing that, once you've done that, business cycle dynamics begin to take over and that's a part of why we're seeing a recovery happening here. The recovery has a lot of different mothers, OK? There is a lot of different reasons why this economy is recovering. The key part that the Fed played was helping the financial system from failing last fall, so we did not fall into the abyss, which would have been much worse than the greatest recession that we've had since World War</s>II.  QUEST: You would agree he was the right man for the right job with his expertise and experience of the Great Depression research.</s>ACHUTHAN: I would agree with that. And I will leave it at that. I will say that he is good emergency room doctor. And he has done a great job there. It would be nice to not go into the emergency room, is the follow-up point.</s>QUEST: All right. So what you're doing is the classic New Yorker.</s>QUEST: It's a classic -- no, it is!</s>ACHUTHAN: All right.</s>QUEST: It's a classic New Yorker line.</s>ACHUTHAN: I'm never satisfied.</s>QUEST: . of, so what have you done for me lately?</s>ACHUTHAN: Exactly. And the next question, right, is, we know there is an exit strategy, we're starting to talk about, how do we get out of this? How do we pull -- you know, take our foot off the gas? And there, you're walking a tightrope, literally. And New Yorkers like that, right? It's very exciting. But on one side, if you pull off and you exit the liquidity that they're applying to the economy, too soon, you risk another recession in short order, and that takes us down a deflationary scenario. On the other hand, if you wait too late and you leave the gas on for too long, then you worry about inflation surging. So on each side you have a big risk.</s>QUEST: We're going to get one, if not the other. We are going -- I mean, the chances.</s>ACHUTHAN: Well, you could -- you could walk the tightrope perfectly. It has been done. I think the best example of this is the middle of the '90s. It's the singular example where the Fed has timed their policy right.</s>QUEST: It was a world -- there was a world of difference from that.</s>ACHUTHAN: World of difference, I agree.</s>QUEST: World of difference.</s>ACHUTHAN: I agree, I agree.</s>QUEST: You didn't have toxic assets still on bank balance sheets. You didn't have leverage up the wazoo.</s>ACHUTHAN: Richard, I agree that the chance of them getting the timing right is very low.</s>QUEST: Which would you rather, flirt with inflation or risk a second recession and bout of deflation?</s>ACHUTHAN: I think they're both horrible, but you'd have to take the flirting with inflation over the two.</s>QUEST: Because we now have to get rid of that.</s>ACHUTHAN: Because you know how to get rid of it and you don't want to get stuck in deflationary spiral. These are big problems, especially if you owe a lot of money. And all households owe a lot of money, and the government owes a lot of money.</s>QUEST: Let's bring this -- let's wrap this up by really talking about Bernanke will get his -- he has been nominated.</s>ACHUTHAN: Absolutely.</s>QUEST: . he will get confirmed.</s>ACHUTHAN: Absolutely.</s>QUEST: But he is going to have to take some uncomfortable -- Mr. Bernanke, you didn't do it very well, in his hearings.</s>ACHUTHAN: He is going to get major heat on, why did we get in the emergency room in the first place. He is going to get major heat on who has the $2 trillion that you loaned out over -- during this course of the last year or so.</s>QUEST: And a quick -- let's finish on this. In all of this, is Alan Greenspan just simply a dirty word?</s>ACHUTHAN: I don't think Alan Greenspan is a dirty word. I think in the 1990s, vintages '90s Greenspan was quite, quite good. When you got into the 2000s, I think he went adrift and, as did Chairman Bernanke, with the very, very low interest rates in 2002 and 2003.</s>QUEST: All right. We shall leave it there for now.</s>ACHUTHAN: All right.</s>QUEST: Many thanks, indeed, for joining us.</s>ACHUTHAN: OK. Thank you.</s>QUEST: And I -- we are lucky, I mean, nice lightweight suits. Nice light jackets. And I'm the idiot standing here in a heavy wool suit.</s>ACHUTHAN: You look good. You look good though. There you go.</s>QUEST: Thank you.</s>ACHUTHAN: All right.</s>QUEST: He had to say that. We got him out of the office for an afternoon. It's this wonderful sunshine. And we're actually in Brooklyn, on the other side, of course, of the East River. And Fionnuala Sweeney is in the -- is in the newsroom where I'm sure it's cooler than it is out here.</s>FIONNUALA SWEENEY, CNN INTERNATIONAL ANCHOR: It certainly is, Richard. We begin in Afghanistan where a car bomb went off outside a government building in the southern city of Kandahar. At least 33 people were killed and dozens more wounded. The violence came just hours after the election commission announced partial results from last week's polls. Incumbent President Hamid Karzai has eked out a slim lead against his main rival, Abdullah Abdullah. Final results are not expected for weeks. British Prime Minister Gordon Brown is finally weighing in on the controversy over the release of the Lockerbie Bomber. Mr. Brown spoke after talks with the visiting Israeli prime minister, Benjamin Netanyahu. Mr. Brown says he was repulsed by the hero's welcome Libya Abdel Basset Ali Al Megrahi on his return to Tripoli. The Scottish justice secretary released the ailing Al Megrahi on compassionate grounds. A diplomatic tit for tat. Syria and Iraq have recalled their ambassadors to each other's country. The move follows last week's deadly bombings in Baghdad. Iraq wants to Syria to hand over two Iraqi suspects living there. The Iraqi government says they played direct roles in the terror attacks which killed at least 100 people. And court papers reveal Michael Jackson died from an overdose of the powerful sedative propofol. That's the preliminary finding by the Los Angeles Coroner. He found Jackson's doctor had given the singer a cocktail of medications in the hours before Jackson died. A single law enforcement source told the Associated Press that the coroner has ruled the death a homicide. And those are the headlines. Back to you, Richard, in the Big Apple.</s>QUEST: We thank you, Fionnuala Sweeney in London. And we'll be back with you in about 15 or 20 minutes from now. When we return, QUEST MEANS BUSINESS, we're in New York, but we will be in Berlin, as our correspondent Fred Pleitgen will be telling us about General Motors's Opel, and a deal that's yet to be done.