What's Plan B if Senate dawdles on Bernanke?

bernanke_091203.gi.top.jpgBen Bernanke's term as Fed chief ends Jan. 31 if the Senate doesn't act.By Jennifer Liberto, senior writer


NEW YORK (CNNMoney.com) -- The Senate faces some weighty issues when it reconvenes this week. Health care. A jobs bill. The debt ceiling.

And then there's the Jan. 31 deadline to confirm Federal Reserve Chairman Ben Bernanke for a second term.

Nobody's really worried that Bernanke will lose his seat. But there is a chance the Senate won't vote before his term expires.

The question is: What happens then?

In back rooms at the Senate and the Fed, staffers and attorneys have been scratching their heads and looking at laws and historical precedents to figure out Plan B for temporary succession.

If the confirmation is delayed, Senate staffers generally believe that Bernanke must temporarily step down as chairman and that Donald Kohn, the vice chairman, should serve as acting chairman.

But some at the Fed argue that Bernanke can remain chairman temporarily.

The law on the matter is a little unclear.

The backstory: Bernanke has his critics in the Senate. Namely: Bernie Sanders, a left-leaning independent from Vermont who often votes with the Democrats, and Jim Bunning of Kentucky, Sanders' political opposite.

But insiders say that Bernanke has locked up more than the 60 votes necessary to break a Senate filibuster. In December, he won solid support from the Senate Banking committee.

Still, it's possible that the confirmation vote could run up against the clock. Even the process of cutting off a filibuster takes a couple of days, followed by up to 30 hours of final debate, according to Senate rules.

Rules vs. history: The law that created the Federal Reserve spells out rules for succession. But it doesn't address this specific case.

The law says that the chairman shall preside "at meetings of the board." It continues: "And in his absence, the vice chairman shall preside."

However, that language appears to be addressing a situation in which the chairman misses a board meeting in an emergency.

That happened in the wake of the Sept. 11 terrorist attacks. At that time, Fed Chair Alan Greenspan was in Switzerland for a banking conference and Vice Chair Roger Ferguson presided over board meetings to make emergency loans to banks, according to Fed staff.

The law also says that if there is no Fed chairman, and no vice chair, the board gets to elect a temporary chief or "pro tempore."

That has happened a couple of times. In 1996, Greenspan's reconfirmation was delayed, but he kept his job running the Fed board. With no vice chair, the board elected Greenspan as temporary chair until the Senate confirmation.

The same thing happened in 1948, when incumbent Fed Chief Marriner Eccles was elected temporarily in charge while he awaited reconfirmation.

The Greenspan and Eccles cases seem to provide some historical basis for the camp that argues Bernanke should be allowed to stay chairman.

But the circumstances surrounding Greenspan and Eccles were different in one key way: There were no vice chairmen in each case.

In Bernanke's case, of course, there is a vice chairman who could take the title of acting chairman.

What's next: Senate Banking Committee Chairman Chris Dodd, D-Conn., has urged his colleagues to move quickly on the confirmation process.

"If we do not complete this process, then Chairman Bernanke cannot serve as chairman of the Federal Reserve," Dodd said in December.

The question is causing a bit of a hubbub on Capitol Hill.

"That's always Washington for you," said Lawrence Kaplan, who runs the banking practice at the Paul Hastings law firm.

No one is expecting a palace coup or any change in Fed policy if the Senate doesn't act on time. Still, the succession issue has the potential to raise questions.

"The Fed chairmanship is something very sacrosanct -- and historically is shown extreme deference," said Kaplan, who said he believes the law favors the Senate's interpretation that Vice Chair Kohn should temporarily step up.

In the end, Senate leaders expect to head off any worries about temporary succession and finish up the confirmation before Jan. 31.

"We hope to reach an agreement to consider the nomination before the end of the month," said Regan Lachapelle, spokeswoman for Senate Majority Leader Harry Reid, D-Nev. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,827.75 12.81 0.07%
Nasdaq 4,787.32 29.07 0.61%
S&P 500 2,072.83 5.80 0.28%
Treasuries 2.23 -0.03 -1.15%
Data as of 11:17am ET
Company Price Change % Change
Kinder Morgan Inc 42.32 0.00 0.00%
Apple Inc 119.00 0.00 0.00%
Facebook Inc 77.62 1.99 2.63%
Pfizer Inc 31.10 0.00 0.00%
Bank of America Corp... 17.11 0.00 0.00%
Data as of Nov 26

Sections

The European Parliament has voted to break up Google and weaken its dominance across the region. More

At malls and department stores across America, the faithful are lining up and camping out for deals. More

Two pilots encountered drones while flying over college football games and another pilot saw one while flying over the Hollywood sign. More

Natalie's Cakes and More has raised $84,000 through GoFundMe after protests trash store. More

Retailers are promising big deals this Black Friday, but are the savings actually worth the shopping mayhem? Test your deal-sniffing skills. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.