White House/Peter Souza

Federal Reserve Chairman Ben Bernanke broke out into a visible sweat last week for what must have been the first time in his public life. Summoned before a House panel to defend the Fed's handling of the Bank of America Corp. merger with Merrill Lynch & Co. last fall, he faced tough and persistent questioning for more than three hours.

At issue was whether the Fed and the Treasury Department coerced Bank of America into buying Merrill Lynch at a time when Merrill was the financial equivalent of Pandora's box with a faulty lid. Congressional staffers found enough smoke in subpoenaed Fed e-mails to give members of both parties concerns that the strong arm of the government may have gone too far.

It's a useful rule of thumb to try to avoid situations where Congress is digging through your e-mails, and the heated hearing set off a flurry of speculation that Bernanke's reappointment--his four-year term ends Jan. 31--would be upended by the controversy.

Nothing could be further from the truth. Last week's events practically guaranteed that Bernanke will be sitting in the chairman's office for many years to come.

Each of the last four presidents, during his first term, has reappointed the sitting Federal Reserve chairman. Obama will probably do the same.

Ronald Reagan reappointed Paul Volcker. George H.W. Bush, Bill Clinton and George W. Bush all reappointed Alan Greenspan. In fact, of the chairmen since 1951, only one, G. William Miller, served less than two terms, and he did so because he left the Fed in the midst of stagflation to become secretary of the Treasury.

Soap Opera Plot

Bernanke's reappointment is a Washington soap opera right now, and last week's drama helped clear up the plot. To see why, you need to understand the motivations of each political party.

First, the Republicans. Since Bernanke was appointed by Bush and confirmed by a Republican Congress, he is their man. Accordingly, it might seem odd that so many of them were firing at him last week.

They pursued him for two reasons. First, the overreach of the Democrats during the bailouts is going to be a key focus of the midterm election in 2010, so introducing the theme to public scrutiny is a winning strategy right now.

Also, Republicans are wary of granting the Fed expanded authority to regulate "systemic" risk, and last week's firestorm probably killed any momentum for such efforts. In the end, Republicans will support Bernanke's reappointment, perhaps unanimously.

Three Options

Now, the Democrats. They have three top candidates for the position: Bernanke, Janet Yellen and Larry Summers. The difference in policy among the three is probably inconsequential and almost completely unidentifiable. That makes the appointment a political decision.

Viewed in the abstract, it would be a political advantage for the Democrats to seat a Fed chairman who is more sympathetic to their policies than is Bernanke, a Republican. Federal Reserve chairmen of the opposite party have the annoying habit of speaking up publicly when they see policies they don't like.

But if Democrats replace Bernanke with one of their own, they acquire ownership of Federal Reserve policy. If the recession lasts longer than you like, it's convenient to have a Fed chairman appointed by your predecessor to blame. For Democrats, the political calculation involves weighing the benefits against the costs.

The two candidates more closely associated with the Democratic Party have fundamental political flaws.

Not Political Enough

Yellen, president of the Federal Reserve Bank of San Francisco, is (like Bernanke) a highly regarded academic. She is a pragmatist whose career trajectory has been so stratospheric that she has nothing to gain from being political. She understands the value of an independent Fed and would be extraordinarily unlikely to play political games of any kind.

So if you appoint her to replace Bernanke, you get someone who is very similar to Bernanke--but she is your responsibility. The Democrats would pay for Yellen with ownership of an economy that may well be a political liability by the next election. And they'd get little in return.

Summers is clearly the key economic figure in the Obama administration and might expect a Fed appointment as a reward for his service. However, his actions have increasingly been criticized as excessively political. A recent New York Times story, for example, implied that a minor mutiny among the less- politicized economists in the Obama administration was underway. Bernanke, in contrast, was careful to stay above the fray while he was Bush's top economic adviser.

Prone to Controversy

Summers' partisanship will give his opponents plenty of ammunition. If you add to that the concern that Summers has been almost pathologically unable to speak publicly without arousing controversy throughout his career, it seems unlikely that Democrats would be pleased by his elevation to the most visible of economic-policy positions.

In short, Yellen would not be political enough, and Summers might be too controversial a character to make it worth the bother to appoint him.

All of these forces are impossible to quantify, and it was anyone's guess how things would break. Until last week.

If Democrats had decided they would support Summers or Yellen, they would have hung Bernanke out to dry at the hearing. After all, if you break tradition and refuse to reappoint a sitting Fed chair, you need to have a good reason.

Instead, they focused their criticisms on the Fed, and the actions of Fed staffers. They never took any potshots at Bernanke himself. They will never have a better chance to go after him, and they declined.

Which means that Bernanke's the man.

Kevin A. Hassett is a senior fellow at AEI and the director of economic policy studies at AEI.