In withdrawing his name from consideration as chairman of the Federal Reserve, Larry Summers defused the possibility of a rancorous confirmation fight that would have pitted liberal Democrats against the president’s nominee.
Summers cited the need to avoid a costly nomination battle in his letter to President Obama bowing out of consideration, writing that he has “reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interests of the Federal Reserve, the administration, or ultimately, the interests of the nation’s ongoing economic recovery.”
It was opposition from the Democratic Party’s left flank that raised the political costs for Obama to name his former aide Summers the successor to current Fed Chairman Ben Bernanke. Many liberals mistrusted Summers for his close ties to Wall Street firms, his role in the deregulatory efforts of the Clinton administration as Treasury secretary, and his perceived arrogance and abrasive personality.
Liberals’ apprehension over the possibility that Summers could become the top regulatory and monetary policymaker in the U.S. motivated some lawmakers to pre-emptively endorse the economist thought to be his top rival for the job, current Fed Vice Chairwoman Janet Yellen. A group of 20 liberal Democratic senators sent Obama a letter recommending Yellen in late July in response to rumors that the president favored Summers for the job.
After sources close to the White House continued to portray Summers as the likely nominee, some Democratic senators took the unusual step of signaling that they would vote against him if he were picked. On Friday, Montana Sen. Jon Tester announced that he would oppose Summers, citing Summers’ role in deregulating markets as the reason to vote his candidacy down.
Three other Democratic members of the Senate Banking Committee, Sherrod Brown of Ohio, Jeff Merkley of Oregon, and Elizabeth Warren of Massachusetts, had previously indicated that they would not support Summers’ candidacy. Their opposition meant that, in order to clear the committee, Summers would have had to receive support from the panel’s Republicans, a prospect that would have involved a significant expenditure of the White House’s political capital and further provoked liberal activists at a time when the president’s approval rating is at a low ebb.
In early August, Obama suggested that the White House’s focus on Summers was only a reaction to attacks on the former top economic adviser from the left wing. The president said in a press conference that “when somebody has worked hard for me and worked hard on behalf of the American people, and I know the quality of those people, and I see them getting slapped around in the press for no reason — before they’ve even been nominated for anything — then I want to make sure that somebody is standing up for them.”
Obama had also defended Summers from liberal criticism in a trip to the Capitol to address House Democrats. In both instances, Obama said that Summers would make a good Fed chairman but insisted that he hadn’t chosen a candidate.
Yet criticism from the left wing intensified as the summer wore on. Jim Dean, the president of the progressive political advocacy group Democracy for America, told the Washington Examiner that Summers, “for better or for worse, is a Washington insider, a political insider” and noted that the president would have been risking further political damage with his liberal base by nominating the Harvard professor, especially in light of Obama's recent rifts with his left wing over national security issues.
For their part, Republicans were willing to remain silent and let the nomination process play out and further divide Democrats. But if Summers had been officially nominated, Republicans would have come out in force against him, forcing Obama to seek out GOP senators amenable to the long-time Democrat establishment economic policy guru.
Tony Fratto, a former Treasury official under President George W. Bush and current partner at Hamilton Place Strategies, noted that Republicans are predisposed to dislike Summers for his long record of partisanship and his role in crafting the economic policies of the early Obama administration, including the now-infamous 2009 fiscal stimulus. Fratto noted that a Summers nomination, with Democrats split, would have been “really valuable for the GOP."
Rich Danker, the economics director for the American Principles Project, a conservative policy organization that favors low inflation and tight money, said that “we’ve been looking around to make sure no Republicans would throw Summers a life raft” by voting for him in the case he was nominated, noting Summers’ support for Keynesian monetary policy.
With Summers out of the picture, Yellen is again thought to be the frontrunner for the nomination, although the president has also said that former Fed vice chairman Donald Kohn, currently a scholar at the Brookings Institution, is also a candidate.
Yellen is widely respected and admired by liberals and academic economists.She would likely enjoy the unified support of Senate Democrats and would face an easy confirmation process if chosen.