Summers withdraws from Fed Reserve consideration

FILE: Oct. 16, 2009: Lawrence Summers, then-White House chief economic adviser, speaks at the Buttonwood Gathering in New York. (AP)

Lawrence Summers, who was considered the leading candidate to succeed Ben Bernanke as Federal Reserve chairman, has withdrawn from consideration, the White House said Sunday.

Summers' withdrawal followed growing resistance from critics, including some members of the Senate committee that would need to back his nomination. His exit could open the door for his chief rival, Janet Yellen, the Fed's vice chair. If chosen by President Barack Obama and confirmed by the Senate, Yellen would become the first woman to lead the Fed.

In the past, Obama has mentioned only one other candidate as possibly being under consideration: Donald Kohn, a former Fed vice chair. But Kohn, 70, has been considered a long shot.

The administration also reached out to former Treasury Secretary Timothy Geithner early in the process. Geithner maintained that he was not interested in being considered.

Obama is expected to announce a nominee for the Fed chairmanship as early as this month. Bernanke's term ends Jan. 31, 2014.

In a statement, Obama said he had accepted Summers' decision.

"Larry was a critical member 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," Obama said.

As director of the National Economic Council, Summers oversaw the administration's response to the economic and financial crisis early in Obama's first term.

Yet Summers faced strenuous opposition from some Democrats, including members of the Senate Banking Committee. Summers alluded to the opposition to his candidacy in a letter he sent Sunday to Obama to formally withdraw from consideration.

"I have reluctantly concluded that 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," Summers wrote.

Summers' ascent to the top of the list to succeed Bernanke rankled both opponents of the president as well as some liberal supporters. He has alienated colleagues in the past with a brusque and at times domineering style. Unlike Bernanke, he's not been known as a consensus-builder -- one reason some critics had opposed his nomination.

He was also seen as having been too cozy with Wall Street and was criticized for critical comments he made about women and math and science.

Shaunna Thomas, co-founder of the women's rights group UltraViolet, welcomed Summers' withdrawal, saying she hopes it serves as "a reminder to all that sexism has no place anywhere in society and certainly not in the highest levels of our government."

Thomas called on Obama to nominate Yellen, 67, who has been closely aligned with Bernanke and has helped devise the Fed's low-interest rates policies.

Since joining the Fed's board as vice chair in 2010, she has supported Bernanke's use of not just the Fed's traditional tool of short-term interest rates but also non-traditional tools designed to help the economy. These include bond purchases and guidance to investors about the likely direction of rates.

As early as this week, the Fed is expected to scale back its $85 billion-a-month in Treasury and mortgage bond purchases. Those purchases have been designed to keep long-term loan rates low to get people to borrow and spend and invest in the stock market.

The low rates are credited with helping fuel a housing comeback, support economic growth, drive stocks to record highs and restore the wealth of many Americans.

Yellen has long been considered a top candidate for the Fed chairmanship in part because of her expertise as an economist, her background as a top bank regulator and her experience as vice chair.

Last week, more than 350 economists signed a letter to Obama calling on him to nominate Yellen. The letter was designed to draw attention back to Yellen amid signs that Obama was leaning toward nominating Summers.

The letter, whose signers include economists with ties to Obama, credited Yellen for prescience in warning in 2005 about the impending mortgage meltdown, for her consensus style of leadership and for her commitment to job growth.

Still, a Yellen nomination would likely face resistance from many Republicans. Critics argue that the Fed's low-rate policies have raised the risk of high inflation and dangerous bubbles in assets like real estate and stocks. Yellen is seen as a leading architect of those policies.

Obama had vigorously defended Summers in recent weeks, both in public comments and in closed-door meetings with lawmakers.

"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 Sunday.

The president has been facing trouble with his liberal base on other fronts this year, including revelations about the National Security Agency's spying programs and his call for a military strike against Syria.