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Summers withdraws name from Fed consideration

Monday - 9/16/2013, 12:30am  ET

File- This Dec. 17, 2010 file photo shows Director of the National Economic Council Lawrence Summers arriving for the tax cut extension bill during a ceremony at the Eisenhower Executive Office Building in the White House complex in Washington. President Barack Obama says he has accepted Lawrence Summers' decision to withdraw from consideration for the role of Chairman of the Federal Reserve. Obama says Summers was a critical member of his economic team and says he is grateful for his service on behalf of the country. Summers was the leading candidate to replace current Fed Chairman Ben Bernanke but faced opposition from some Democrats. (AP Photo/J. Scott Applewhite, File)

JULIE PACE
Associated Press

WASHINGTON (AP) -- Lawrence Summers, who was considered the leading candidate to succeed Ben Bernanke as Federal Reserve chairman, has withdrawn from consideration, the White House said Sunday.

Summers' withdrawal followed growing resistance from critics, including some members of the Senate committee that would need to back his nomination. His exit could open the door for his chief rival, Janet Yellen, the Fed's vice chair. If chosen by President Barack Obama and confirmed by the Senate, Yellen would become the first woman to lead the Fed.

In the past, Obama has mentioned only one other candidate as possibly being under consideration: Donald Kohn, a former Fed vice chair. But Kohn, 70, has been considered a long shot.

The administration also reached out to former Treasury Secretary Timothy Geithner early in the process. Geithner said he was not interested in being considered.

Obama is expected to announce a nominee for the Fed chairmanship as early as this month. Bernanke's term ends Jan. 31, 2014.

Some economists said Sunday that they think Summers' exit significantly boosts the likelihood of a Yellen nomination.

"The odds that the president will nominate Janet Yellen are now much higher," said Mark Zandi, chief economist at Moody's Analytics.

Still, Zandi added, "There is a chance that there is some dark horse candidate, possibly Tim Geithner."

David Jones, chief economist at DMJ Advisors and the author of several books on the Fed, said he saw Yellen's selection as a virtual certainty.

"There is a strong view that making a woman Fed chair is an important step," Jones said. "There is no question that her experience qualifies her for the role."

Summers and his allies had been engaged in an unusually public contest with Yellen supporters, with each side lobbying the administration.

An openly waged succession battle is something that the Fed, which will turn 100 in December, has never before witnessed. The selection of a chairman has long been a matter handled privately by a president and his senior advisers.

In a statement Sunday, Obama said he had accepted Summers' decision.

"Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today," Obama said.

As director of the National Economic Council, Summers oversaw the administration's response to the economic and financial crisis early in Obama's first term.

Yet Summers faced strenuous opposition from some Democrats, including some on the Senate Banking Committee. Summers alluded to that opposition in a letter he sent Sunday to Obama to formally withdraw from consideration.

"I have 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," Summers wrote.

Summers' ascent to the top of the list to succeed Bernanke rankled both opponents of the president as well as some liberal supporters. He has alienated colleagues in the past with a brusque and at times domineering style. Unlike Bernanke, he's not been known as a consensus-builder -- one reason some critics had opposed his nomination.

He was also seen as having been too cozy with Wall Street. And Summers was roundly criticized for questioning women's innate skills in math and science -- comments that contributed to his forced resignation as Harvard's president in 2006.

Shaunna Thomas, co-founder of the women's rights group UltraViolet, welcomed Summers' withdrawal, saying she hopes it serves as "a reminder to all that sexism has no place anywhere in society and certainly not in the highest levels of our government."

Thomas called on Obama to nominate Yellen, 67, who has been closely aligned with Bernanke and has helped devise the Fed's low-interest rates policies.

Since joining the Fed's board as vice chair in 2010, Yellen has supported Bernanke's use of not only the Fed's traditional tool of short-term interest rates but also non-traditional tools designed to help the economy. These include bond purchases and guidance to investors about the likely direction of rates.

As early as this week, the Fed is expected to scale back its $85 billion-a-month in Treasury and mortgage bond purchases. Those purchases have been designed to keep long-term loan rates low to get people to borrow and spend and invest in the stock market.

The low rates are credited with helping fuel a housing comeback, support economic growth, drive stocks to record highs and restore the wealth of many Americans.

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