Summers shows interest in Fed chairman nomination
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Wall Street supporters of President Obama are being told by former Treasury Secretary Lawrence "Larry" Summers that he wants to succeed Ben Bernanke as chairman of the Federal Reserve.
WASHINGTON --Former Treasury Secretary Lawrence Summers is indicating to President Barack Obama's Wall Street supporters that he wants to become Federal Reserve chairman, according to people familiar with the matter, as he keeps in touch with senators who would vote on the nomination.
"As a matter of fact, I have a meeting scheduled with him next week," Sen. Max Baucus, a Montana Democrat and chairman of the Finance Committee, said July 9. "I don't know what's on the agenda."
Summers, 58, who was Treasury secretary under President Bill Clinton and Obama's first National Economic Council director, is one of the potential candidates to succeed Chairman Ben Bernanke, according to two people familiar with the matter, who requested anonymity.
Obama and his advisers have started to focus on how the president will put his mark on the central bank. Bernanke's term expires at the end of January 2014 and the administration has started a search under the assumption that he doesn't want a third four-year term, according to two administration officials who requested anonymity.
After leaving government, Summers has advised the hedge fund D.E. Shaw & Co., resumed teaching at Harvard University, and writes a monthly newspaper column. Kelly Friendly, his spokeswoman, declined to comment.
Other potential candidates for the position include current Fed Vice Chairman Janet Yellen and former Vice Chairman Roger Ferguson, now the chief executive officer of New York-based TIAA-CREF, according to the two people.
Yellen would be the Fed's first female chairman if she were nominated and confirmed. Summers, who was president of Harvard from 2001 to 2006, ignited controversy in 2005 with comments suggesting that women lacked an aptitude for science and engineering. He apologized repeatedly for the remarks before he stepped down as the university's president.
Obama also will seek to fill a vacancy on the Fed's Board of Governors; Elizabeth Duke is resigning effective Aug. 31 after five years on the board, the Fed said in a statement yesterday.
Sen. Elizabeth Warren, a Massachusetts Democrat and former Harvard Law School professor, said Summers and Yellen are both "very smart people." Asked in an interview Friday with Bloomberg TV's Peter Cook whether Summers cold be confirmed, she said: "I don't know."
Amy Brundage, a White House spokeswoman, declined to comment on Summers.
Speculation about Summers for the position has been fueled, in part, by his previous interest in the job, as well as by Obama's statements indicating that he doesn't expect Bernanke to remain in the post.
Bernanke has stayed at the Fed "a lot longer than he wanted or he was supposed to," Obama said in an interview with Charlie Rose broadcast on PBS on June 17. He praised Bernanke for having done "an outstanding job."
Frustrated by a Congress that has ruled out any additional fiscal stimulus, Obama's political and economic advisers want the next Fed chairman to maintain Bernanke's focus on reducing unemployment, according to one administration official. The White House shares Bernanke's view that inflation doesn't present a current danger to the economy.
Bernanke said in a speech July 10 in Cambridge, Mass., that the Fed believes a "highly accommodative monetary policy for the foreseeable future is what's needed in the U.S. economy."
Fed officials have said that they won't consider raising the main interest rate until the unemployment rate falls to 6.5 percent, as long as long-term inflation expectations don't exceed 2.5 percent.
Many Fed officials want to see more signs that employment is picking up before they will begin slowing the pace of $85 billion in monthly bond purchases, according to minutes of policy makers' last meeting.
Some Senate Republicans plan to use the Fed chairman nomination as a forum to air their concerns about inflation and the asset purchases, known as quantitative easing, under Bernanke, said Senator Charles Grassley. Under Bernanke, the Fed's balance sheet has grown to $3.5 trillion from $835 billion when he took office.
"Bernanke is not going to have his balance sheet down to $800 billion," said Grassley, an Iowa Republican. 'It's going to be a big thing for who the next chairman is.''
"We can't stand to have hyper-inflation worse than we had in the 1980s," he said. "It's going to be a big debate."
Bernanke was confirmed by the Senate for his second term in 2010 by a vote of 70-30, receiving more "no" votes than any chairman in the Fed's history, and the White House is bracing for another potentially bruising battle, said the officials.
While Summers is in contact with some senators, and testified before the Senate Budget Committee in June, he hasn't reached out to all members of the Senate Banking, Housing and Urban Affairs Committee, which will hold confirmation hearings on Obama's Fed nominee.
"He hasn't contacted me directly," said Sen. Tim Johnson, D-S.D. and chairman of the banking committee.
Other senators say that Summers has been good about tending to his relationship with them.
"I see him from time to time and we always talk economics," said Sen. Ron Wyden, D-Ore. "I have always found him to be responsive when I called, both when he was in the White House and when he was out."
A Summers nomination would draw fire from progressives in his party. Many Democrats fault Summers, while he was Clinton's Treasury secretary, for not doing more to regulate Wall Street or seeking economic stimulus when he was Obama's NEC director.
Summers would be a "very poor choice," for Fed chairman, said Representative Alan Grayson, a Democrat from Florida.
"I think in some respects he has impeded" economic recovery, he said.
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