Summers Pulls His Name From Consideration For Fed Chief

Former Treasury Secretary Larry Summers has withdrawn from consideration as the next chairman of the Federal Reserve. He cited a potentially divisive nomination hearing. Summers was widely thought to be President Obama's top choice to replace Ben Bernanke next year.

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Of the many people the president appoints to important jobs, only one is appointed to a job that on certain issues is potentially more powerful than the presidency itself. The chairman of the Federal Reserve is formally independent. Outgoing Chairman Ben Bernanke oversaw massive intervention in the economy during the Great Recession. Now we're beginning to see a narrowing of the candidates to replace him.

Former Treasury Secretary Larry Summers withdrew from consideration. He ran into fierce opposition, especially from the left. Now the frontrunner appears to be Fed Vice Chairman Janet Yellen.

NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: Summers told the president in a letter that he wanted to avoid an acrimonious confirmation battle that wouldn't serve the interests of the Fed or the economy. The odds against his nomination had been growing in recent days, after at least three Democrats on the Senate Banking Committee said they would vote against him.

Jared Bernstein is with the Center on Budget and Policy Priorities.

JARED BERNSTEIN: I think the arithmetic in the Banking Committee became impossible. I suspect if Larry had been nominated and had been able to get out of the banking committee, he might've been OK on the Senate floor in terms of his confirmation. But if you can't get out of the committee, the White House just isn't going to send him up.

ZARROLI: Summers was Treasury secretary under Bill Clinton and also served as president of Harvard University before becoming an advisor to President Obama. He's long had a reputation as a brilliant but abrasive. But what bothers many people on the left are his economic policies.

Dean Baker is with the Center for Economic and Policy Research.

DEAN BAKER: Summers was a major proponent of the policies that gave us the crisis and the downturn. He was a big proponent of deregulation of the financial system. His management of the East Asian financial crisis led to the overvalued dollar, which has given us large trade deficits. So I think I'd say he has a pretty bad track record.

ZARROLI: Baker notes that Summers played a role in the passage of Obama's economic stimulus bill, which many on the left have long derided as too small. Baker also says Summers' views on financial deregulation made him a poor choice to head the Fed, which regulates some banks.

But Summers had his defenders too. Jared Bernstein worked with Summers in the White House during the passage of the Dodd-Frank financial overhaul bill. He says Summers had evolved as an economist since the Clinton years, in ways his critics didn't always give him credit for.

BERNSTEIN: I thought it was clear that he'd learned from the regulatory mistakes he'd made in the '90s and was no obvious friend to the banks. But key senators on the banking committee certainly didn't see it that way.

ZARROLI: As the opposition to Summers' employment grew, President Obama seemed to dig in his heels. At a press conference in August, he insisted he hadn't settled on Summers, then he went on to defend him anyway.

PRESIDENT BARACK OBAMA: When somebody has worked hard 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 him.

ZARROLI: But Obama had to contend with more than just opposition to Summers. He also faced a grassroots effort to name someone else, economist Janet Yellen, who has a wide backing among her peers and unlike Summers has served on the Fed.

The nomination battle has taken on considerable significance with women's groups. Summers has long been unpopular with them because of comments he made as Harvard president about women's aptitude for science.

But Terry O'Neill, president of the National Organization for Women, says the opposition to Summers goes beyond that.

TERRY O'NEILL: The White House is indicating that the president would pass over the better qualified woman for the less qualified man who happened to be his friend. This is something that women have seen over and over and over and over again in our working lives, and it makes us cross-eyed with frustration.

ZARROLI: The president can still pass up Yellen in favor of someone else. But if he does, he risks angering a key part of his base, which is eager to see him name the first female Fed chair.

Jim Zarroli, NPR News.

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