N.Y. TIMES
With as many as five Democrats on the Senate Banking Committee ready to vote “no” on Lawrence H. Summers for the position of chairman of the Federal Reserve, the White House’s favored candidate faced long odds in winning Senate confirmation. On Sunday, Mr. Summers pulled out of contention, citing a potentially “acrimonious” battle that could harm the economy and Mr. Obama’s presidency.
In its search for a new Fed chairman, the White House had for months centered on Mr. Summers, who smarted after being passed over for the position when Mr. Obama decided four years ago to name Ben S. Bernanke to a second term as chairman. This time, with Mr. Obama determined to replace Mr. Bernanke after eight years in office, the administration considered Mr. Summers, who worked intimately with them during the financial crisis, by far the best candidate. Mr. Summers, a former Treasury secretary to President Clinton was Mr. Obama’s chief White House economic adviser through the height of the financial crisis and recession in 2009 and 2010. In those years he formed a bond with Mr. Obama and others in the White House despite a tendency toward arrogance.
But a number of Senate Democrats, rather than waiting for the nomination process to play itself out, raised concerns as soon as his name surfaced this summer: his reputation for being a divisive and abrasive colleague, his perceived role in coddling Wall Street and the lax regulation of derivatives, and complaints that he did not support smaller community banks as much as the nation’s giant financial institutions, among other issues.
The Senate Banking Committee consists of 12 Democrats and 10 Republicans. Every Democrat in the no column would have to be balanced with a yes vote from a Republican to win the support of the committee. By Mr. Merkley’s count, Mr. Summers might have needed as many as five Republican votes.
Ms. Janet Yellen, the Fed’s vice chairwoman, told friends in recent weeks that she did not expect to be nominated as the next chairman of the Federal Reserve. Although she had been the Fed’s vice chairman since 2010 and would make history as the first woman to hold the job, President Obama’s aides made clear throughout the summer that he wanted Lawrence H. Summers, his former chief economic adviser. Now, she has again become the presumptive front-runner, as she had been for much of the spring. Senate Democrats, for their part, have made their thoughts on her known. Despite lukewarm Republican support, she would almost certainly sail out of committee and clear a full Senate confirmation vote, too.
Supporters of Mr. Summers, including many of the president’s closest advisers, had raised some concerns about Ms. Yellen in recent months. Perhaps most potently, they said that institutions benefited from fresh leadership and argued that Ms. Yellen’s crucial role in creating the Fed’s current policies could inhibit her ability to make necessary changes.
Some presidential advisers also argued that Mr. Summers brought crisis management experience and a working knowledge of financial markets that Ms. Yellen lacks — although so did Ben S. Bernanke when President George W. Bush selected him as chairman.
Nonetheless, the president’s advisers insisted throughout the summer that Mr. Obama was not averse to Ms. Yellen but simply more comfortable with Mr. Summers. Administration officials and supporters acknowledged that the president would enrage his party’s base if he were now to reject Ms. Yellen and forfeit the chance to name the first woman to the most influential economic job in the world.She has long argued that markets benefit from regulation to prevent abuses and limit disruptions of economic growth. She also played a leading role in shaping what has become the conventional wisdom that central banks, for the sake of job growth, should seek to moderate rather than eliminate inflation.
Most important, she has led a committee devoted to improving the Fed’s communications with its primary audience, investors, and with the broader public, a goal she shared with Mr. Bernanke. Under Ms. Yellen, the committee built an internal consensus for changes, including Mr. Bernanke’s regular news conferences and the declaration that the Fed thinks 2 percent annual inflation is just right.