Crisis tests Bernanke; most see him up to task

By Ros Krasny - Analysis

CHICAGO (Reuters) - The future job prospects of Federal Reserve Chairman Ben Bernanke could hang in the balance as the U.S. central bank wrestles with the biggest global financial market crisis in decades.

A renowned scholar of the economic causes of financial crises, Bernanke, the soft-spoken former Princeton economics professor, now has a chance to make history of his own.

"This is like a 1980s savings and loan situation with three more zeros on the end of it," said Doug Roberts, chief investment strategist with Channel Capital Research, referring to large-scale mortgage-related losses on Wall Street books.

A straw poll of Fed watchers suggested many think Bernanke is doing a good job cleaning up a mess years in the making, from the bursting of a housing bubble that took a half a decade to build to a related implosion in subprime mortgage lending.

Bernanke's four-year term as chairman expires in January 2010. His future could depend as much on the outcome of the November U.S. presidential election as on the Fed's success in staving off or cutting short a recession.

The Fed, under Bernanke's guidance, has pulled out the stops in the past couple weeks to push liquidity into shaky credit markets. It has also cut benchmark lending rates from 5.25 percent to 3.0 percent since mid-September, with another big rate cut on tap at a policy meeting on Tuesday.

A number of prominent economists, including National Bureau of Economic Research President Martin Feldstein, think the Fed was too slow to respond to the global credit crisis that erupted in August last year and has been swirling ever since.

Republican presidential candidate John McCain, referring to the Fed's aggressive interest rate cuts in January, said in February he "would have liked to have seen those rate cuts earlier." However, his top economic adviser said on Monday the Arizona Senator had "complete confidence" in Bernanke.