President Barack Obama will Tuesday award Ben Bernanke a second term as Federal Reserve chairman, entrusting him with forging recovery from the worst economic slump since the 1930s.
In a sudden break from his vacation on well-heeled Martha's Vineyard off the US east coast, Obama was set to appear with Bernanke at 9 am (1400 GMT) to publicly offer him a second four-year term beginning in January.
"The man next to me, Ben Bernanke, has led the Fed through one of the worst financial crisis that this nation and this world have ever faced," Obama said in a copy of his prepared remarks.
"Ben approached a financial system on the verge of collapse with calm and wisdom, with bold action and outside-the-box thinking that has helped put the brakes on our economic freefall."
Obama's unexpected announcement, on what aides had said was a "no news" vacation, will likely give the financial markets, on which many Americans depend for their retirement savings, a quick boost.
It may also dampen criticism of the president's economic management on a day when his Office of Management and Budget and the Congressional Budget Office are both due to release new statistics on the ballooning deficit.
Obama's sudden announcement could suck media interest away from a flurry of lawmakers' town hall meetings featuring attacks on his limping health care reform plan and a new row over Bush-era "war on terror" tactics.
Bernanke was selected as Federal Reserve chairman by Obama's predecessor George W. Bush in 2005 to replace retiring Fed chairman Alan Greenspan, who served for 18 years and presided over a golden era of economic prosperity.
At the tail end of Bush's second term and the beginning of Obama's presidency, Bernanke has been a key player in stabilizing markets and prescribing the antidote to the worst crisis since the Great Depression of the 1930s.
He has enjoyed broad support on Wall Street, for the sweeping and sometimes unorthodox methods he has used to save the banking sector, redefine the financial industry and keep the recession from turning into a depression.
But Obama may face some opposition in Congress to his decision to reappoint the central banker, which requires Senate confirmation.
Senate banking committee chairman Chris Dodd vowed to hold a "thorough and comprehensive confirmation hearing" for Bernanke's renomination, which requires Senate confirmation.
"I still have serious concerns about the Federal Reserve's failure to protect consumers and I strongly believe these responsibilities should go to an independent consumer financial protection agency," Dodd said in a statement, while calling Obama's decision "probably the right choice."
Obama's move may be calculated to send a signal of continuity and to reassure financial markets that are still fragile, despite signs the global economy is slowly returning to growth -- especially outside the United States.
Changing the Fed chairman at such a time might have spooked investors and been seen as a dramatic reversal of policy, considering Bernanke was such a key player in fighting off the crisis.
The 55-year-old, a former chairman of the Council of Economic Advisors under Bush, has worked closely with the Treasury Department and the White House in plotting a route out of the recession and stabilizing and reforming the debt-laden US financial sector.
He now faces the delicate decision of how quickly to scale back the massive government effort to pump liquidity into the financial system.
In a sign seen by analysts of a step away from extraordinary support of the economy, the central bank said earlier this month that it would begin to pull back from the purchase of Treasury bonds and mortgage-backed securities.
Prospects for global recovery appeared good despite financial market strains, Bernanke said last week, while cautioning that any economic growth would be slow at first.
Dodd criticized the Fed chief for being "too slow to act during the early stages of the foreclosure crisis," although the senator acknowledged that Bernanke "ultimately demonstrated effective leadership and his reappointment sends the right signal to the markets."
Launching into a defense of his policies, Bernanke told central bankers at a meeting in Jackson Hole, Wyoming that "policymakers in the United States and around the globe responded with speed and force to arrest a rapidly deteriorating and dangerous situation."
Copyright 2009  AFP Global Edition
