White House adviser drops bid for Fed job
Lawrence Summers, the former Treasury secretary and senior White House economic adviser, has withdrawn as a candidate for Federal Reserve chairman in a startling development that raises urgent questions about who will lead the central bank when chairman Ben Bernanke steps down in four months.
Summers withdrew after uproar among liberal Democrats, women's groups and others against his potential nomination - a highly unusual assault on the candidate President Barack Obama appeared to favour.
Obama is considering two other candidates, the Fed's vice-chairman Janet Yellen and its former vice chairman Don Kohn. But he was leaning towards Summers, people close to the White House say.
Summers helped Obama navigate the depths of the financial crisis and recession, which the president told aides he deeply valued. No official, with the possible exception of former Treasury secretary Timothy Geithner, did more to influence the president's response to the traumatic events at the start of his term.
On Sunday, Summers phoned the president to say he was withdrawing his name from consideration. "It has been a privilege to work with you since the beginning of your administration as you led the nation through a severe recession into a sustained economic recovery," Summers wrote. He added: "This is a complex moment in our national life. I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the administration, or ultimately, the interests of the nation's ongoing economic recovery."
Obama accepted Summers' decision, lauding him and saying he would continue to consult his former adviser.
The withdrawal marks a disappointing turn of events for the renowned economist. But he has been dogged by controversies. Summers came under fire for his support for deregulating parts of the banking sector while Treasury secretary under former president Bill Clinton. As president of Harvard University in 2005, he sparked controversy for comments on women's aptitude in maths and science.
People close to the White House said Summers faced not only a rebellion among liberal Democrats but also challenges including a debate over whether to launch a military strike against Syria that stretched out the Fed process, providing time for opposition to build.
"It was just a perfect storm of bad timing," said one person close to the White House. "It would have been absolute war, and the President would have had to spend all of his political capital. Larry decided not to drag him through it."
The contest for Fed chairman had taken the form of a political campaign, as allies of Summers and Yellen advanced their cases in the media and in behind-the-scenes whispering campaigns.
A wide array of Obama officials backed Summers, citing his crisis experience and economic prowess. Yellen's supporters cited her deep Fed experience and role as an architect of the central bank's efforts to reduce unemployment.
The drama started after word of Summers' candidacy first circulated early in the northern summer when most Fed watchers believed Yellen would be appointed.
Liberals on Capitol Hill, as well as a wide array of economists, erupted. They said his brusque personality would be problematic at the Fed.
When questioned on Capitol Hill, Obama made many of the same points in defence of his former adviser. But due to heated opposition, Obama announced he would wait until autumn to decide, hoping to buy time and cool tensions.
Obama is now short on time to make a nomination, given the Senate often takes months for confirmation. While some speculated on Sunday that Obama might turn to Geithner, a person close to the former Treasury secretary said he did not want to be considered.
The decision may give a lift to markets, which were affected by uncertainty about the Fed nomination and the idea Summers would have been less supportive of the Fed's efforts to reduce unemployment.
"This news should be positive for the markets," said Millan Mulraine, director of US rates research at TD Securities.