Former US Treasury Secretary Lawrence Summers withdrew on Sunday from consideration to succeed Federal Reserve chairman Ben Bernanke after fierce opposition from within the Democratic Party hurt his chances of being confirmed in Congress.
Summers, a former top aide to President Barack Obama and widely regarded as a brilliant economist and a shrewd and decisive policymaker, was considered to be the front-runner for the position to replace Bernanke, whose second term expires in January.
But Summers was dogged by controversies including his support for deregulation in the 1990s when he ran the Treasury Department in the Clinton Administration – blamed by some for the financial crisis of 2007-2009 – as well as for comments he made about women’s aptitude while president of Harvard.
“It became obvious he did not have support from some in his own party and had too much baggage to get approved for a number of reasons,” said Richard Daskin, chief investment officer at RSD Advisers in New York.
Summers’s withdrawal appeared to open the door for the nomination of Fed vice chair Janet Yellen, who was seen as his chief rival for the position. Yellen, who has a long career in the Fed system and also chaired the White House Council of Economic Advisers under former president Bill Clinton, would be the first woman to lead the US Central Bank.
Still, the President has said he is also considering others, and has mentioned former vice chairman Donald Kohn, who retired in 2010 after 40 years at the Fed. Roger Ferguson, who was vice chairman from 1999-2006 and is currently chief executive of the academic retirement fund TIAA-CREF is also considered a possibility.
Former Treasury Secretary Timothy Geithner, while popular at the White House made clear on Sunday he has not wavered from his oft-expressed disinterest in the job.
Summers’s withdrawal in a letter to Obama in which he said any confirmation process would likely be acrimonious and a distraction came after weeks of intense political pressure for the Administration.
The President sought congressional approval for a military strike against Syria for a suspected poison gas attack against rebels, only to meet resistance from within his own Democratic ranks as well as from Republican lawmakers.
Looking ahead is the approaching battle between the Administration and Republicans in Congress over government funding and an extension of the US debt ceiling, without which the federal Government could shut down in two weeks and the nation could default on its debt.
It was not clear if Summers was persuaded by Obama to withdraw because of growing fears that nominating him as Fed Chairman would lead to an ugly battle within the president’s own party, or whether Summers decided himself that he did not want to go through such a potentially damaging process.
“Maybe it was a recognition that he wasn’t going to get through the confirmation process, and Obama certainly doesn’t seem to have a whole lot of political capital right now,” said Scott Frew, managing partner and owner, Rockingham Capital Advisors in Hartford, Connecticut.