While on his recent vacation in Martha’s Vineyard, President Obama nominated Ben Bernanke to a second term as chairman of the Federal Reserve. First appointed by President Bush in 2006, Bernanke’s 4-year term expires in January. The nomination must be confirmed by the U.S. Senate, but that appears virtually certain.

The Federal Reserve controls short-term interest rates and manages the U.S. money supply, making it enormously powerful over the economy. Presidents rarely cede that power to a Fed chairman of the opposing political party. The fact that President Obama did so highlights the consensus among financial and political leaders that a steady hand and continuity are paramount during troubled economic times. Not everyone agrees, of course, but Wells Fargo U.S. Economist Mark Vitner, on FOXBusiness.com, summed up a widely-held appraisal of the Fed chairman’s recent performance:  “There’s no reason to change when Bernanke is doing all the right things.”

As a scholar of the Great Depression, Bernanke has long held the view that the Great Depression was caused to a large extent by the Fed’s inaction.  Over the past 18 months, the Fed has carried out an unprecedented expansion of liquidity to combat financial panic and unfreeze credit markets. For now, it seems to be working. Looking ahead, many believe Bernanke faces the daunting challenge of devising an “exit strategy” that allows economic recovery to take hold and keeps inflation buttoned down.

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