Washington A defeat of Federal Reserve Chairman Ben Bernanke’s quest for another four-year term could raise the risk of a “double dip” recession if political jousting over a successor were to drag on for months, economists warn.
But Bernanke’s prospects appeared to brighten Sunday, with three more senators, including Republican leader Mitch McConnell of Kentucky, predicting he’ll be confirmed. A vote is expected later this week.
Still, the chance of Bernanke’s defeat has unsettled Wall Street, contributing to last week’s 4 percent loss by the Dow Jones industrial average, its worst performance in 10 months. If Bernanke were rejected, uncertainty over a successor would further roil global markets, at least in the short run.
Anxiety, along with sagging investments, could cause consumers and businesses to cut spending. Joblessness, already at 10 percent, could worsen. And the recovery might fail.
Economists who fear a double-dip recession — in which the recovery would collapse into another recession — regard it as a worst-case scenario. But they don’t rule it out, either.