This week’s special election for the Massachusetts senate seat is not the only vote this January carrying major implications for U.S. economic policy. Ben Bernanke’s term as Federal Reserve Chairman expires at the end of the month—just over a week from now. Despite being re-nominated by President Obama and receiving approval from the Senate Banking Committee by a margin of 16-7, Bernanke still must be approved by the full Senate, where he has seen a growing level of opposition coming from both sides of the aisle. Technically, approval of his nomination requires only a simple majority, but it must first survive a cloture vote to limit debate and that means 60 votes will be the benchmark for another 4-year term.
Should the margin from the banking committee carry over to the full Senate, Bernanke will have received the smallest positive confirmation margin since Paul Volcker’s 84-16 second term approval. Not exactly a vote of confidence. If lawmakers fail to come to agreement by January 31st, Vice Chairman Donald Kohn will serve on an interim basis until Senate approval is given. Obviously, the bigger (and more remote) what-if then becomes: what happens if Bernanke is voted down? My guess is it won’t be pretty.