Bernanke Confirmation Vote Update

The media is noting that procedural maneuvering is frustrating attempts to hold the Senate vote on the confirmation of Bernanke's appointment for a second term as Fed Chairman. Some reports claim that the Republicans are considering a filibuster. Even though Bernanke is a self-identified Republican and was initially appointed by a Republican president, there is talk that the vote could be along party lines, with the Republicans generally opposed. Bernanke's term expires at the end of the month. It is possible that the parliamentary moves may postpone the vote into Feb. However, on balance it continues to appear most likely that Bernanke's appointment is confirmed. We note that the policy market at www.intrade.com still shows the odds as around 80% chance he is confirmed. This is down from the peak around 96%, but is still seems relatively confident.

There are several scenarios short of an outright rejection of Bernanke's appointment. The wrangling itself is probably a small negative for the dollar and US assets. A withdrawal of Bernanke's nomination by Obama would likely be more negative, even though the market's affection for Bernanke does not seem particularly deep. The uncertainty especially given the extraordinary state of monetary policy would likely lead to dollar and Treasury sales.

It is not clear who would be on the short lists for alternatives to Bernanke that would be acceptable to a Republican Party that is feeling its oats. Economic advisor Summers has reportedly coveted the spot and there might be some thought to have Volcker return to the post. However, when it is all said and done, it is not clear that another leading contender for the post would have behaved much differently than Bernanke during this crisis. It seems less about ideology and more about politics.