In what could be considered a blow to the Obama administration, longtime Fed policy guru Lawrence Summers has withdrawn his name for consideration to replace retiring Federal Reserve Chair, Ben Bernanke.
In a letter to President Obama dated September 15, 2013 Summers accepting the writing that was on the wall. Despite some insiders claiming he was the President’s primary choice, Summers became a political lightening rod for several Democratic Senators who vehemently expressed they were opposed to his nomination. A successful campaign was mounted to oppose Summers and was led by; Sherrod Brown (D-OH), Jeff Merkley (D-OR) and Jon Tester (D-MT), and was recently joined by freshman Senator Elizabeth Warren (D-MA). All were quite vocal in their opposition.
Nikkei received word from an Obama administration source that Summers would be the man.
In the world of who is first with news reporting, it was once again demonstrated you must be wary of unnamed sources. Just like week Japanese’s Nikkei news was sure Summers would be appointed. The news created momentum and by Friday other outlets, including Reuters, joined in the chorus indicating Summers was a sure bet. Later in the day the Obama administration finally came out indicating they were not aware Summers was indeed a nomination lock.
Less than 50% chance
While Summers is experienced as a financial leader, he has come under criticism for his role in supporting deregulation during the Clinton administration. This ideology is contrary to the political climate in Washington where more, not less deregulation is the sentiment. Further, it has become apparent that a Summers nomination would face a tough confirmation battle with less than a 50% change in being successful. With many initiatives lined up to mark his final term it was clear Obama did not need any protracted fights or issues which would distract attention from his current agenda.
Will Yellen get the nod?
Summers departure leads the way for Obama’s other top pick, Janet Yellen who is currently serving as Vice Chair for the Fed. Many applaud her role in knowing the players on Wall Street as well as having a better grasp on public financial policy. Obama had previously indicated he would name his choice before Bernanke retires. In the meantime the Fed meets later this week and it will be interesting to note their updated stance of continuing to buy bonds which have been used to support the economy.