Just when it appeared that Larry Summers had the nomination for the next Fed chair all wrapped up, Summers called the White House on Sunday and told his good friend President Obama that he was withdrawing his name from consideration. He then sent a formal withdrawal letter to the president:
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.
The president dutifully responded with the appropriate accolades:
Larry was a critical part of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today.
Many observers would seriously question about how successfully the administration “faced down” the crisis or how effective it has been in wrestling the economy “back to growth,” especially since the crisis had its genesis in the easy money provided by the Fed and the encouragement of previous administrations to loosen mortgage lending standards. They would also question the “progress we are seeing today,” as the economy continues to struggle with high real unemployment, low growth, and increasing dour outlook and sentiment readings.
The real reasons Summers asked to have his name removed from consideration were practical, political, historical, and moral.
Practically speaking, the opposition from three Democrats — Senators Jeff Merkley (D-Ore.), Sherrod Brown (D-Ohio), and Jon Tester (D-Mont.) — on the Senate Banking Committee, which would have begun the confirmation process, put the outcome into serious doubt. Democrats outnumber Republicans on that committee 12-10, and the defection would mean that passage would require enlisting help from some Republicans, a dubious proposition at best.
Politically speaking, this is not the best of times for the president. With his poll numbers continuing to drop and a budget and debt ceiling war brewing with the House Tea Party conservatives, it was easy to cast off Summers as a battle not worth fighting.
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Photo of Janet Yellen: AP Images