Mark Wilson/Getty Images
Larry Summers was thought to be the front runner for the job as the new head of the Federal Reserve until he withdrew from the race yesterday.
What a difference a day makes. Just 24 hours ago, the world over was expecting Lawrence Summers—a top economic advisor to President Obama and the Treasury Secretary under President Clinton—to be a shoo-in as the country’s next Federal Reserve chief. Summers was President Obama’s top choice, despite reservations from many lawmakers, economists and academics, who instead favor the Fed’s current Vice Chair Janet Yellen for the post.
All that changed yesterday after a small group of Democrats on the Senate Banking Committee came out to say that they would vote “no” if Summers was nominated. The unexpected defection led to an even bigger surprise: an announcement from Summers saying that he has decided to pull out of the Fed chief race, so as to spare the country from a nomination process that would be “acrimonious and not serve the interests of the Federal Reserve, the Administration, or ultimately, the interests of the nation's ongoing economic recovery."
The stock and bond market responded to the news Monday positively. Summers is commonly seen as a proponent of deregulation and has been held up by opponents as one of the culprits that led the country into the Great Recession. Yellen, his erstwhile top rival for the job, is thought of as someone who would continue the scheduled unwinding of the Fed's stimulus measures.
With Summers’ exit, Yellen seems poised for the top job of running the US economy. Still, other names have been floating about. The Wall Street Journal reports that other possible candidates include Donald Kohn (former Vice Chairman of the Fed), Roger Ferguson, another former Fed Vice Chair, Christina Romer, former chairman of the White House Council of Economic Advisers, and former Treasury Secretary Timothy Geithner, who immediately said he isn’t interested in the gig after Summers’ pull out.
The current Fed chairman, Ben Bernanke, ends his term at the end of January 2014.
The race for the Fed chief seat has been characterized by intrigue and public anger—something that a decade ago wouldn’t have been thought possible. It’s one testament of the recession’s effects on our everyday lives.
What do you think of Summers withdrawal? Is this good for the economy of not? What do you think of having the first woman Fed chief?
Heidi Moore, the Guardian's U.S. finance and economics editor