President Barack Obama could be months away from announcing his pick to replace Ben Bernanke at the Federal Reserve, yet critics are already making an unusual public effort to stop one contender in the race – former U.S. Treasury Secretary Lawrence Summers.
Pedro da Costa and Mark Felsenthal
The outcry has come not from Republicans, but the left wing of the Democratic Party. Summers advised Obama, was treasury secretary under former President Bill Clinton, led Harvard University and was chief economist for the World Bank. He helped tame the Asian financial crisis that threatened to sweep the globe under Clinton.
But liberals blame him for spearheading financial deregulation that they charge helped create the financial crisis, and say his work at hedge fund D.E. Shaw makes him the epitome of a revolving door between Wall Street and government.
A representative for Summers, who writes an opinion column for Reuters, declined to comment for this article, as did the White House and the Fed.
Some powerful Democrats, including former Treasury Secretary and one-time Citigroup executive Robert Rubin, have been speaking up behind the scenes for Summers, according to multiple sources with close ties to the Fed or the White House.
If Obama tapped Summers, he would be picking him over the Fed’s current vice chair, Janet Yellen, who is seen as the other main candidate for the job.
Both Yellen and Summers would be expected to hew fairly close to the policy course set by Bernanke.
Supporters of Summers argue he should have an edge given his crisis-management experience.
“When there is consensus, who the Fed chair is hardly matters, and the times when it matters are the times when you have to think outside the box, and then his strengths shine,” said Brad DeLong, a professor at the University of California, Berkeley, who worked with Summers in the Clinton Treasury Department.
According to aides, Senate Democrats who oppose him have penned a letter urging Obama to choose Yellen, who has been a major force in the Fed’s efforts to stimulate a sluggish U.S. recovery using unconventional monetary policies. Yellen would be the first woman to head the central bank.
Democratic Senator Sherrod Brown of Ohio was circulating the letter, the aides said. It was unclear how many senators had signed it, but several Democrats have already spoken out in favour of Yellen and against Summers.
“I am for Janet Yellen. I am taking that position,” Democratic Senator Tom Harkin of Iowa told Reuters.
A spokeswoman for Brown did not respond to emails requesting comment, and a Fed spokeswoman said Yellen declined to comment.
Bernanke’s second four-year term at the helm of the central bank expires on January 31, 2014. While he has not discussed his plans, it is widely expected he will step down.