Correction: An earlier version of this story inaccurately referred to Lawrence Summers as President Obama’s treasury secretary. He served in that position in President Clinton’s administration, and was Obama’s National Economic Council chairman. The story has been corrected.
Lawrence Summers has shaped economic policy for two Democratic presidents, presiding over an unparalleled run of success during the Clinton administration and helping to pull the economy back from the brink during President Obama’s tenure.
But as the White House considers nominating him to head the Federal Reserve, Summers is facing the greatest resistance from an unlikely source — his own political party.
With the grumbling against Summers growing, Obama on Wednesday mounted an extraordinary defense of his friend and old adviser in the halls of Congress. He told Democrats that Summers deserved credit for helping restore the economy and expressed frustration with the campaign against him. Many Democrats have endorsed Summers’s rival, Fed Vice Chairman Janet Yellen, to lead the central bank.
Obama “was defending Summers from attacks in the left and in the media that he felt were very unfair,” said Rep. Gerald E. Connolly (D-Va.), who was present. “This was defending someone he sees as his friend and a loyal public servant.”
Obama, Connolly said, “felt he needed to unload himself of growing frustration . . . with what he perceives to be an unfair character campaign to disparage and diminish Larry Summers.”
The president’s defense came amid letters from 20 Senate Democrats and 37 House Democrats urging him to nominate Yellen to replace Fed Chairman Ben S. Bernanke. Over the years, Democrats have clashed with Summers, not just over what some officials have described as an abrasive style but also over issues such as his skepticism on aiding manufacturing companies, his unmitigated support of free trade and his past efforts to deregulate the financial industry.
The White House has said a nomination is not due until the fall, and Obama said on Wednesday he has not made a decision. He also appeared to throw a new name into the ring: former Fed vice chairman Donald Kohn, now a scholar at the Brookings Institution.
After the meetings with the president, Senate Majority Leader Harry M. Reid (D-Nev.) called Summers “a friend” and said Democrats would support whomever Obama chose.
The back-and-forth over Summers was striking because the Harvard professor would seem, on the surface, to stand to benefit from his role in shaping Obama’s economic policies — including the 2009 stimulus and the Dodd-Frank overhaul of financial regulation — that Democrats on Capitol Hill routinely celebrate. And as President Bill Clinton’s Treasury secretary, Summers was a steward of the 1990s economic boom that lifted median wages and the stock market.
“He was always a forceful advocate for reducing inequality and fighting off austerity and having aggressive growth strategies that were based in the middle class,” said Neera Tanden, a former White House official who is president of the Center for American Progress, where Summers is a fellow. “He’s basically in line with everything that progressives stand for.”
Yet in Congress, it appears that very few lawmakers have publicly endorsed Summers as a potential Fed chairman. Among the questions that have been raised about Summers is his management style, which critics say is overly brusque, as well as the personality clashes that occurred when he was director of Obama’s National Economic Council and president of Harvard.
Democrats have raised the most concern about his decision in the 1990s to support the end of the Glass-Steagall Act, which prohibited banks from taking part in speculative trading. He also successfully fought a proposal by Brooksley Born, then chairman of the Commodity Futures Trading Commission, to regulate the financial instruments known as derivatives that later played a role in exacerbating the 2008 financial crisis.
During the Obama administration, he initially opposed a provision in Dodd-Frank, the Volcker Rule, that was aimed at limiting the risks banks could take and had strong support on the left. One of the authors of the rule, Sen. Jeff Merkley (D-Ore.), a member of the Senate Banking Committee, expressed reservations about Summers’s regulatory record this week.
“I start from a position of being extraordinarily skeptical that his background is appropriate for the role of the head of the Fed,” he told Bloomberg News.
Merkley added, “If you nominate someone who is a life-committed deregulator to be in a regulatory position, and if you believe regulation is necessary to prevent fraud, abuse, manipulation and so forth, then there’s a lot of questions to be asked: Why is this person appropriate?”
Despite the lack of audible support, Jim Messina, a former deputy White House chief of staff, said Summers would have strong backing among Democrats. “There are lots of people like me that believe Larry would be a great pick,” he said.
Although Summers’s position on financial regulation has caused the most concern among critics, his views on other questions of economic policy have also diminished his standing among liberals in Congress.
In particular, Summers was among the figures on Obama’s team who were skeptical of both government investments in the manufacturing industry and taking a more confrontational approach with China over allegations that the country gave its manufacturing companies an unfair leg up in global trade.
In an interview last year, Sen. Sherrod Brown (D-Ohio) recalled how Summers dismissed calls for more investment in manufacturing when he was Obama’s economic adviser.
“He sat in my office one day and said we don’t want to pick winners and losers,” Brown said. “I said we picked finance in this country for 30 years and I just want a level playing field.”
Brown, who circulated the Senate letter supporting Yellen for Fed chairman, said Obama began to pursue a more robust manufacturing policy only after Summers and other skeptical officials left the White House. “The people who have replaced them are more interested in manufacturing than those who left,” he said.
On Wednesday, Brown said Summers’s past positions “have not been right,” but he said that Democrats’ support for Yellen is primarily a tribute to her, not a reflection on Summers.
“I know him personally,” Brown said. “I just think Janet Yellen would be a better Fed chair.”
Ed O’Keefe, Paul Kane, David Nakamura and Jenna Johnson contributed to this report.