WASHINGTON – Ben Bernanke is one step away from becoming the next Federal Reserve Board chairman after the Senate Banking Committee approved his nomination Wednesday on a voice vote.
The vote to recommend Bernanke is the second-to-last hurdle to confirmation, a step that is expected in the full Senate, although exactly when has yet to be determined.
"Dr. Bernanke is eminently qualified and a superb choice for the nomination of Federal Reserve chairman," the committee's chairman, Sen. Richard Shelby, R-Ala., said before the vote.
Bernanke, 51, would succeed Alan Greenspan, who will retire at the end of the year. Greenspan, 79, has been at the post since 1987.
Bernanke currently is chairman of the White House Council of Economic Advisers. Prior to that, he served three years on the Federal Reserve board. He also was a professor for many years at Princeton. The board oversees the Fed, which sets interest rates and is one of the major market-regulating forces. The chairman is often seen as one of the most powerful positions in the United States.
Bernanke on Tuesday spent three hours before the Senate Banking Committee, telling the panel that he would largely maintain Greenspan's approach — except on how he would target inflation — and that he would not be influenced by politics when making decisions.
"I will be strictly independent of all political influences," he vowed.
Bernanke's most prominent difference with Greenspan is on how he believes the Fed should set interest rates, specifically, that he would like to move toward inflation targeting, or numerically stating acceptable bounds for inflation. He did not say that he would institute a specific plan, however.
Greenspan has argued that inflation targets can restrain the Fed's flexibility, but Bernanke argues that would not be the case. The Fed has operated with an informal inflation rate target of 1 percent to 2 percent, excluding energy and food.
One economic tool against inflation is to hike interest rates, which can encourage saving money. The problem occurs when interest rates that are too high slow economic growth.
Only one senator, Jim Bunning, R-Ky., opposed Bernanke in the voice vote Wednesday. Bunning said he thought Bernanke would be too much like Greenspan and not enough of an independent thinker.
But Sen. Charles Schumer, D-N.Y., who serves on the Banking Committee, said Bernanke "has the potential to follow in the footsteps of the giants like Paul Volker and Alan Greenspan. The near unanimous vote in the committee shows the broad bipartisan support he has."
Market watchers also said Bernanke was a lock after his appearance at Tuesday's hearing.
"He gave a bravura performance. For people who wondered about his political skills, he certainly answered those questions," said Lyle Gramley, a former Fed board member.
President Bush has also been credited with picking Bernanke. The selection has been likened to the president's decision to nominate John Roberts to be chief justice of the United States. Roberts, who took over in October, is regarded by many as a crisp and rare legal mind. Bernanke is considered the equivalent in the financial sector.
Part of the reason for Bernanke's success was his ability to walk a fine line about his views on budget politics during senators' questioning. He did not outwardly oppose current Bush administration policy but he also repeated his own economic writings, which warn of the problems caused by big budgets and trade deficits.
When Democrats tried to pin him down over whether he would support re-imposing budget rules that would require future tax cuts to be paid for, Bernanke said he did not plan to take positions on specific budget proposals, a switch from Greenspan.
Greenspan has two meetings left as head of the Fed. Many private economists say they believe the board will push interest rates higher during those meetings in an effort to make sure energy prices do not cause higher overall inflation.
The Associated Press contributed to this report.