The drumbeat of leaks from the White House this summer has made clear that former US Treasury secretary Larry Summers is the Obama administration’s leading candidate to be the next chairman of the Federal Reserve. But that may all be over now that three key liberal senators—Elizabeth Warren, Jeff Merkely and Sherrod Brown—have said they won’t vote to confirm him.
The problem for Summers is that US president Barack Obama’s Democrats have only a two-seat majority on the Senate Banking committee, and without the votes of those three members, Republican senators will have to fill the gap. While there are several, including top Republican Mike Crapo, who haven’t voiced an opinion, they aren’t inclined to do the administration any favors.
Summers is hypothetically a centrist choice for the position, given his pragmatic record, but his work on the Obama administration’s economic policies has put him in direct conflict with the current crop of Republicans. Though Fed vice chair Janet Yellen, the other top candidate for the position, is perceived as more dovish, she doesn’t have Summers’s talent as a lightening rod for controversy and would likely gain the full backing of the committee’s Democrats.
Many Republicans have been critical of the measures the Federal Reserve has taken since the crisis to stimulate the economy, making them reluctant to support any of Obama’s Fed candidates. Winning over even one vote may require promises the White House (or the future nominee) doesn’t want to make, at a time when it will be asking for votes on several controversial issues. If the administration is forced to rely on Democratic votes, it may have to turn away from its likeliest pick.
The opposition from Warren, a law professor at Harvard when Summers was president of the university, is particularly notable. After the financial crisis, Warren became the most important advocate of a new consumer financial protection agency, working with Summers and other administration officials to write it into the Dodd-Frank financial reform law. But Summers would ultimately oppose her nomination to head the agency permanently, just one of the grudges progressives hold against him.
Ironically, for Warren, who is happily known as a scourge of Wall Street, she happens to be siding with the banks on this one. Judging by informal surveys and market actions, the financial sector seems more supportive of Yellen than Summers.