Summers pulls out of fight for Federal Reserve chair

Olivier Knox
Yahoo News
Harvard University's President Emeritus and Charles W. Eliot Professor Lawrence Summers gestures while he speaks during The Economist's Buttonwood Gathering in New York in this file photo
Harvard University's President Emeritus and Charles W. Eliot Professor Lawrence Summers gestures while he speaks during The Economist's Buttonwood Gathering in New York October 25, 2012. Summers, a former top economic aide to President Barack Obama and a Treasury secretary under President Bill Clinton, has withdrawn from consideration to succeed Ben Bernanke as Federal Reserve chairman, according to sources. REUTERS/Carlo Allegri (UNITED STATES - Tags: BUSINESS EDUCATION)

President Barack Obama faces big fights with Republicans this fall on spending and raising the government’s ability to borrow. But now he won’t face a potentially bruising battle with fellow Democrats over confirming one of his closest economic aides, Larry Summers, to be chairman of the Federal Reserve.

Obama said in a statement Sunday afternoon that he had spoken to the former treasury secretary and accepted his decision to withdraw from consideration to replace Ben Bernanke as Fed chairman.

“Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression,” the president said. “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.”

It was the second time in less than a year that a favored close adviser withdrew from consideration for a high-level post for which he or she was thought to be the favorite: In December 2012, Susan Rice withdrew from contention to succeed then-Secretary of State Hillary Clinton in the face of Republican opposition.

In an ironic twist, the news came on the fifth anniversary of the collapse of Lehman Brothers — a pivotal moment in the 2007-2008 financial crisis from which the country has yet to fully recover.

The decision spared Obama a potentially grim confirmation fight: 20 Democratic senators had written him in July urging that he pick Fed Vice Chairman Janet Yellen to replace Bernanke. And some Democrats on the Senate Banking Committee, which will have a say in confirming the White House’s choice, had come out firmly against Summers.

Summers played a critical role in crafting the economic stimulus package Obama pushed through Congress in early 2009. But he was also seen as a driving force behind the deregulation of financial markets under then-president Bill Clinton.

And some Democrats regarded Summers — widely seen as Obama’s top choice for Fed chair — as insufficiently committed to using the central bank’s power over interest rates to bolster job creation. And with the left flank of the Democratic party already up in arms over the NSA spying scandal, a confirmation fight could have weakened the president as he heads into a difficult autumn and predictable battles with Republicans.

A nominee is expected as early as this week. Bernanke's term expires at the end of January.

“I will always be grateful to Larry for his tireless work and service on behalf of his country, and I look forward to continuing to seek his guidance and counsel in the future,” Obama said.

In a letter to Obama, Summers said the United States is at a “complex moment in our national life.”

“I have reluctantly concluded than any possible confirmation process for me would be acrimonious and would not serve the interests of the Federal Reserve, the Administration, or ultimately, the interests of the nation’s ongoing economic recovery,” said Summers.

Summers became Obama's National Economic Council director in 2009 and served until early 2011.