Bernanke Gets Top Marks as Investors Say Economy Is Past Worst

Bernanke Gets Top Marks as Investors Say Economy Is Past Worst

July 22 (Bloomberg) -- Global investors give Federal Reserve Chairman Ben S. Bernanke top marks for combating the worst financial crisis since the Great Depression and overwhelmingly favor his reappointment amid optimism that the world economy is on the mend.

Sixty-one percent of investors surveyed in the first Quarterly Bloomberg Global Poll say the world economy is stable or improving and almost 75 percent take a favorable view of the 55-year-old chairman. By almost a three-to-one margin, they say Bernanke has earned another four-year term when his current one expires in January.

“He’s the best, maybe around the world,” said Wallace Lin, an investment manager with Euro Asset Management in Hong Kong, who participated in the poll. Investors ranked Bernanke higher than his counterparts at other major central banks, including European Central Bank President Jean-Claude Trichet.

The vote of confidence strengthens Bernanke’s hand as he faces congressional criticism that the Fed overstepped its authority by helping to rescue failing financial institutions in the midst of the crisis. It also gives his bid for another term a boost. President Barack Obama has praised Bernanke’s performance atop the central bank without saying whether he wants him to stay.

Market Repercussions

“If he weren’t renominated, it could have potentially very serious and severe repercussions on the stock market and the economy,” said Jack Liebau, a poll participant and president of Pasadena, California-based Liebau Asset Management Co.

Investors consider recession a bigger threat to the U.S. economy than rising prices over the next two years, the poll showed. Sixty-one percent cite recession as the greater risk, compared with 37 percent who name inflation.

Martin Feldstein, a professor of economics at Harvard University who was considered for the position of Fed chairman before Bernanke took over in 2006, praised the policy maker. Bernanke has “done a very good job and I think he should be reappointed,” Feldstein said in an interview yesterday on Bloomberg Television.

The first Quarterly Bloomberg Global Poll is a survey of investors and analysts on six continents. It is based on interviews from July 14 to July 17 with a random sample of 1,076 Bloomberg subscribers, who represent leading decision makers in markets, finance and economics.

Trichet, King, Zhou

The poll showed Trichet received a favorable rating of 54 percent, while Bank of England Governor Mervyn King garnered 50 percent approval and China’s central-bank governor, Zhou Xiaochuan, received 42 percent. Bernanke outpolled the other central bank chiefs even in their own regions.

Bernanke also received a higher rating than U.S. Treasury Secretary Timothy Geithner, who formerly ran the New York Federal Reserve Bank. The Treasury secretary got a 57 percent rating worldwide -- even though a majority of investors in the U.S. view him unfavorably. More than 52 percent of American respondents take a negative view of Geithner, compared with about 32 percent in Europe and 24 percent in Asia.

Bernanke has countered the credit crisis with actions unprecedented in the central bank’s 95-year history. He cut the benchmark lending rate to as low as zero and expanded credit to the economy by $1.1 trillion over the past year.

U.S. Banks Recovering

More than three-quarters of investors expect U.S. financial institutions will be in better shape a year from now, though only 2 percent say they will be back to full health. Just 10 percent think they will be in worse shape.

Respondents aren’t as sanguine about European banks, with 23 percent saying their condition will deteriorate in the next year.

Investors in Asia are more optimistic than those in the U.S. and Europe about the outlook for the global economy, the poll showed. More than three-quarters of Asian investors say the world economy is stable or improving, compared with 62 percent in Europe and 50 percent in the U.S.

Regional differences in the global outlook “may be a matter of what they see around them,” said J. Ann Selzer, president of Selzer & Co. of Des Moines, Iowa, which conducted the poll for Bloomberg. Half of Asian investors “say the economy in their region is improving -- more than three times as many as say that in the U.S.,” she said.

The International Monetary Fund said July 8 that emerging- market economies including China will help pull the world out of the deepest contraction in six decades.

China’s Recovery

China’s gross domestic product grew 7.9 percent in the second quarter, the government reported last week in Beijing, making the nation the first major economy to rebound from the global recession.

“Fiscal policy and monetary stimulus have been introduced around the world, and we are seeing signs, particularly in China, that they are beginning to work,” Jim Owens, chief executive officer of Caterpillar Inc., said in a statement yesterday. Peoria, Illinois-based Caterpillar, the world’s largest maker of construction equipment, reported second-quarter profit that exceeded analysts’ forecasts.

More than half the investors polled expect long-term interest rates to rise over the next six months as global growth picks up. Among equity investors, 52 percent foresee higher yields, compared with 49 percent of fixed-income investors.

Higher Long-Term Rates

“I don’t see them going anywhere but up,” said David Jaderlund, municipal bond portfolio manager with Jaderlund Investments in Albuquerque, New Mexico. Currently, he said, Treasury securities “aren’t paying anything.”

Benchmark 10-year notes yielded 3.48 percent at 5:15 p.m. yesterday in New York, compared with an average 4.56 percent over the last decade.

Investors expect short-term interest rates to be little changed over the next six months, the poll showed. Almost three quarters say central banks will hold rates near current levels to support growth.

“Monetary policy remains focused on fostering economic recovery,” Bernanke said in his semi-annual report to Congress yesterday. The Fed intends to maintain a “highly accommodative” monetary policy for “an extended period,” he said.

“The U.S. economy may be ailing,” said Selzer. “But these financial leaders agree the man at the helm of the economy is the right guy for the job, for now and for another term.”

bloomberg