There was some speculation that Obama would replace Bernanke with another prominent economic adviser, such as Larry Summers, Paul Volker, or Timothy Geithner. Talk of replacing Bernanke appeared to have died down over the last few months as the economy began showing signs of improvement.
"The reappointment announcement was not a big surprise," said Brian Bethune, chief U.S. financial economist, in a note to clients. "Bernanke has earned his stripes for masterful leadership of the Fed, and other monetary and banking policies, since October 2008, when it became clear that the U.S. economy, in conjunction with other major industrialized countries, was moving into a deep economic recession with major systemic risks to the financial system."
"Most economists would have said absolutely reappoint him," said Gregory Rosston, deputy director of the Stanford Institute for Economic Policy Research, in an interview. "He's done a phenomenal job."
Gus Faucher, director of Macroeconomic Research for Moody's Economy.com, also believes that Bernanke deserved a new term. He acted aggressively when he should through his support of the commercial paper and asset-backed securities markets, according to Faucher.
Unlike his predecessor, Alan Greenspan, Bernanke has tried to appear human, speaking in relatively plain English, appearing on "60 Minutes" and acting to make the Fed more transparent. Occasionally, he comes across as an absent minded professor; this makes sense given his former position as chairman of Princeton University's Economics Department.
Bernanke has already proven his political mettle. He is, after all, a Republican appointed by President George W. Bush. Many blamed Bernanke for failing to prevent the recession and expected Obama to appoint a Democrat to replace him.
But had Obama replaced Bernanke, investors may have reacted negatively, sending markets plunging. The reaction internationally, particularly among countries that purchase large amounts of U.S. would have also been difficult to gauge, according to economists.
Bernanke's replacement "would have face some very interesting negotiations with central bankers and have to establish his or her credentials," says David John, senior researcher with the conservative Heritage Foundation in Washington.
The politicking over Bernanke's second term has already begun. According to The Wall Street Journal, Bernanke has garnered support from two members of the Senate Finance Committee who are polar opposites politically: Chuck Schumer, a Democrat, and Bob Corker, a Republcian. He also received the backing of House Financial Services Committee Chairman Barney Frank and Senate Majority Leader Harry Reid.
Though officials expect him to get a grilling by members of Congress -- including his nemesis, Rep. Ron Paul of Texas -- Bernanke's reappointment seems highly likely. Former Fed Vice Chair Alice Rivlin says Bernanke is "about the perfect person this job. He has coped with a very difficult situation."