UPDATE: Greg Mankiw says:
Bad News for Ben (and for the rest of us). ... This uncertainty cannot be good for financial markets.
UPDATE: Megan McArdle points out:
I see the political logic, but the economic logic is pretty poor. Bernanke didn't become Fed chair until 2006, long after it was realistically possible to do much about the bubble except wait for it to pop. He shepherded us through the financial crisis without another Great Depression--maybe not perfectly, but no Fed chair would have been perfect. The markets have confidence in him. Spiking his nomination may have grim effects on 401(k)s throughout the land.
Moreover, whatever he did that wasn't popular, he clearly did with the connivance of Congress. Congress wanted him to pump money into banks; they just didn't want to take political responsibility for it. If they'd really objected, they could have amended the Federal Reserve Act at any time and stopped him cold. But they knew what he knew: if the banking system seized up, there would be absolutely enormous suffering. They wanted, as he did, to err on the side of creating moral hazard and bailing out undeserving bankers, rather than bread lines and 25% unemployment.