WASHINGTON – Central bank policy dove Janet Yellen was seen as the front-runner Monday to lead the Federal Reserve after President Barack Obama’s apparent preferred candidate Larry Summers’ surprise withdrawal.
Yellen, currently vice chair of the Fed, and so the top lieutenant to outgoing chairman Ben Bernanke, appeared to have broader support among Obama’s Democrats who had become the first line of resistance to Summers.
But the White House remained mum on who the president’s pick would be, a day after Summers removed himself from contention in a process that has become highly politicized.
“This is a complex moment in our national life. 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 recovery,” Summers wrote to the president.
Obama had not said more than that Summers was on his short list — as was Yellen.
However, expectation had been widespread that he intended to pick Summers, his former top economic policy adviser, for the job.
“It’s really, really hard to see how Obama can justify not picking Janet Yellen at this point. Nobody else is as qualified; any other choice would look like spite,” wrote Nobel economist Paul Krugman on his New York Times blog.
Summers had run into vociferous opposition from liberals over his record on policy and his forceful personality, seen as inappropriate to lead the consensus-focused Federal Open Market Committee, the Fed’s policy board.
In particular, three Democratic senators on the Senate Banking Committee, the first stop for congressional approval, raised questions about Summers having driven the banking deregulation that led directly to the financial crisis, and about his alleged closeness to Wall Street.
In addition, nearly 500 economists around the country signed a letter in support of Yellen that made clear their objection to Summers.
“Dr. Yellen was one of the first members of the Federal Open Market Committee to realize that the financial sector’s difficulties in 2007 could cause a major recession, and she worked to focus her colleagues on the problems of the housing sector,” their petition said.
“As our weak recovery enters into its fifth year of slow economic growth, a continued commitment to expanding jobs through appropriate policy is a must for the next (Fed) Chair. Dr. Yellen has demonstrated this commitment.”
Their lack of support, combined with the expected opposition from Republicans who object to most of Obama’s picks for high office, posed a steep hurdle to a Summers nomination.
Sen. Elizabeth Warren, one of the key Democrats against Summers, told MSNBC television that she hoped Yellen will be nominated. “She has great experience, she has great judgment,” Warren said. “I think she would make a terrific Federal Reserve chair.”
Yellen, 67, sits smack in the middle of the Fed “doves,” those focused on stimulating the economy back to full employment and, not yet at least, worried about the specter of easy money sparking uncontrollable inflation.
She has spent more than a dozen years altogether at the Fed in various positions, including the last four years as vice chair. If chosen, she would be the central bank’s first female chief.
But aside from Summers and Yellen, Obama has given little hint of who else might be on the short list.
Speculation focuses on another former Fed vice chair, Donald Kohn, now at Brookings Institution; former Treasury Secretary Timothy Geithner; and Roger Ferguson, another former Fed vice chair who now heads retirement financial services group TIAA-CREF.
Warren said she did not know whom the White House would propose, or when.
“I think that the president is working through a difficult decision,” she said. “It’s a reminder of the importance of the Federal Reserve chair.”