The battle for the top job at the Federal Reserve escalated over the past week amid a renewed push to support the central bank’s vice chairman for the post.
The unusually controversial race has come down to Janet Yellen, once considered the shoo-in for the job, and Lawrence H. Summers, who has been a top economic adviser to the past two Democratic administrations. Summers has come under fire for his role in deregulating the financial industry when he served under President Bill Clinton. The upcoming nomination has also ignited debate over the lack of women in senior positions in the Obama administration.
President Obama has said he expects to name his pick for Fed chairman in the coming weeks. The White House also is considering appointing two women to occupy other vacant seats at the Fed, according to two people familiar with the process. But the move did little to quiet Yellen’s supporters or placate Summers’s detractors.
“I don’t really think this changes the dynamics of a Summers confirmation fight,” said a Democratic aide, who spoke on the condition of anonymity to discuss personnel issues. “The bottom line is, there is no way to avoid this being a very ugly and divisive political fight.”
The three Democratic senators who have been Summers’s most vocal opponents sit on the committee that would have to clear his nomination before it could be sent to the floor: Sherrod Brown (Ohio), Jeff Merkley (Ore.) and Elizabeth Warren (Mass.). If they voted against Summers, Obama would need help from at least two Republicans to get his nominee out of committee.
Sen. Mike Johanns (R-Neb.) told Roll Call that he would be “open” to confirming Summers, and a spokesman said Johanns will wait until the nomination is made before making his decision. Johanns and Sen. Bob Corker (Tenn.) were among a handful of Republican senators on the banking committee who voted to advance Fed Chairman Ben S. Bernanke’s second term in 2010.
Earlier this year, all 10 GOP committee members approved the president’s picks to lead the Council of Economic Advisers, Jason Furman, and the Securities and Exchange Commission, Mary Jo White. But they opposed Rep. Mel Watt (D-N.C.) to oversee the Federal Housing Finance Agency. His nomination squeaked by the Democratic-led committee but is in limbo before the full chamber.
The math at the Fed also does not help Obama: Four women could be leaving the central bank, including Yellen if she is not picked as chairman and steps down. Names of only two women — Lael Brainard, a senior official at the Treasury Department, and Jan Eberly, former chief economist at Treasury under Clinton — have surfaced as possible replacements.
“Anytime gender is raised as an issue, it doesn’t matter if you say it’s irrelevant or not,” said Laura Tyson, a professor at the University of California at Berkeley who is close to Yellen and Brainard. “It’s raised.”
Tyson was among more than 400 economists who signed a letter to Obama, urging him to nominate Yellen and calling her “superbly qualified.” The letter was organized by the Institute for Women’s Policy Research, a think tank, and included signatures from heavyweights such as Robert Shiller of Yale University, Michael Woodford of Columbia University and Christina Romer of Berkeley.
A few days earlier, Nobel laureate Joseph Stiglitz wrote a scathing op-ed in the New York Times criticizing Summers and arguing that Yellen has the “judgment, wisdom and gravitas one should expect from the leader of the Fed.”