Summers withdraws from Fed race

In an unexpected move, Larry Summers has decided not to try to succeed Ben Bernanke as the head of the Federal Reserve Board despite being the presumed front-runner for the job.

Here’s the story from the New York Times:

Lawrence H. Summers, one of President Obama’s closest economic confidants and a former Treasury secretary, has withdrawn his name from consideration for the position of chairman of the Federal Reserve amid rising opposition from Mr. Obama’s own Democratic allies on Capitol Hill.

In a statement released by the White House on Sunday afternoon, Mr. Obama said he had accepted the decision by his friend even as he praised him for helping to rescue the country from economic disaster early in the president’s term.

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Mr. Summers appeared to have been the White House’s favored candidate to succeed Ben S. Bernanke as chairman of the Fed, though Mr. Obama had repeatedly said he had not yet made a decision between Mr. Summers, Janet L. Yellen, who is a vice chairwoman of the Fed, or someone else.

But Mr. Summers’s reputation for being brusque, his comments about women’s natural aptitude in mathematics and science, and his decisions on financial regulatory matters in the Clinton and Obama administrations had made him a controversial choice.

Three Senate Democrats on the Banking Committee had come out against Mr. Summers’s nomination, meaning that the White House might have had to barter for as many as three Republican votes for him even to pass out of committee.

In a letter to the president, Mr. Summers said, “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.”

For Mr. Obama, the concession by Mr. Summers ends a frustrating period in which the most private of White House deliberations became a public spectacle and fodder for an ugly disagreement among the president’s supporters and allies.

The Wall Street Journal reported on some of the other names President Obama may be considering now that Summers is no longer in the mix:

Lawrence Summers pulled out of the contest to succeed Ben Bernanke as chairman of the Federal Reserve after weeks of public excoriation, forcing President Barack Obama to move further down the list of contenders to head the central bank.

One leading candidate is Janet Yellen, the Fed’s current vice chairwoman, who has garnered substantial support among Democrats in Congress and among economists. But the public lobbying on her behalf appears to have annoyed the president, say administration insiders, and may lead him to look elsewhere.

Mr. Obama has said he interviewed Donald Kohn, a former Fed vice chairman who is now a senior fellow at the Brookings Institution. Administration insiders say Timothy Geithner, the former Treasury secretary, also is a possibility, though he has said he doesn’t want the job. Dark horse candidates include Stanley Fischer, an American citizen who recently stepped down as governor of the Bank of Israel, and Roger Ferguson, another former Fed vice chairman and now chief executive of TIAA-CREF, the nonprofit pension company.

Bloomberg explained the issues surrounding Summers confirmation at the end of their story:

The decision by Tester, Brown and Senator Jeff Merkley of Oregon, to publicly oppose the nomination of Summers created a hurdle for the administration on the banking panel, where Democrats hold a 12-10 edge. Support from Republicans, none of whom declared support for Summers, would have been needed for the nomination to clear the committee.

If Summers had been sent forward by the committee, a Senate floor fight would likely have followed. Lawmakers who have been critical of the Fed under Bernanke, such as Senator Rand Paul, a Kentucky Republican, and Sanders, indicated they might have been willing to try holding up the nomination.

Sanders today praised Summers for withdrawing and clearing the way for a better candidate.

“The truth is that it was unlikely he would have been confirmed by the Senate,” Sanders said in a statement e-mailed to reporters. “What the American people want now is a Fed chairman prepared to stand up to the greed, recklessness and illegal behavior on Wall Street, not a Wall Street insider.”

Behind the scenes, staff and lawmakers, even those who said they would support Summers, voiced concern in interviews about the intraparty fight a Summers nomination would cause. Democrats, who hold a majority in the Senate, face negotiations on the budget and an increase in the debt ceiling in the coming weeks.

The shock of Summers withdrawing from consideration will wear off and the race to name the next person to top the list is now underway. I just hope that the speculation will die down soon and there will be a substantive debate about monetary policy and the future of our economy. The nation deserves a vetting process that will hopefully spark a good debate.