Senate Banking Committee Chairman Chris Dodd said today that Ben Bernanke cannot remain as chairman of the Federal Reserve if the Senate does not confirm him by January 31 when his four-year term expires. In an interview on CNBC, Dodd said Fed Vice Chairman Donald Kohn would take over as chairman. Sen. Judd Gregg (R., N.H.) made the same point. The comments generated some confusion on Wall Street, but the situation isn't clear-cut.

This much is clear: A Fed chairman cannot automatically stay in his position after his four-year term as chairman expires. Members of the Fed board, in contrast, can remain in office as governors until their expired term has been filled. The Federal Reserve Act says that the Fed vice chairman acts as chair in the "absence" of the chairman. But "absence" is not defined.

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