September 13, 2013 8:34 pm

Republicans hold strong hand if Obama wants Summers at Fed

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments
Lawrence Summers©Bloomberg

When a Democratic congressman told Barack Obama at a meeting on Capitol Hill in July that he should not appoint Lawrence Summers to head the Federal Reserve, the president jumped to the defence of his former adviser.

But there is one legacy of Mr Summers’ record Mr Obama may not appreciate if he picks him as the next Fed chairman. So strong is the emerging Democratic antipathy to Mr Summers that Mr Obama will have to sweat on a bloc of Republican votes in the Senate to get him across the line.

The White House says Mr Obama has made no decision on the Fed but its failure to damp speculation that the president and his advisers want Mr Summers over his chief rival, Janet Yellen, the Fed vice-chair, has hardened perceptions the former Treasury secretary will get the nod.

The assumption that Mr Summers will be nominated lies behind the frantic vote-counting on the Senate banking committee, which must clear any candidate before he or she goes before the full Senate to be confirmed.

The Democrats have a 12-10 advantage on the committee, but already at least three members of the majority – Sherrod Brown of Ohio, Jeff Merkley of Oregon and Jon Tester of Montana – have put themselves firmly in the anti-Summers camp.

A fourth Democrat, Elizabeth Warren, elected last year from Massachusetts, is leaning “no”, with people familiar with the issue indicating on Friday that she had relayed “serious concerns” to the White House about Mr Summers at the Fed.

If all four go against Mr Summers, he will need a substantial bloc of Republican support on the committee, potentially sparking an uncomfortable partisan fight over a position that has tried to stay above politics.

But it is a fight that many Democrats and Republicans, for different reasons, want to have.

All four Democratic senators share a distaste for the financial deregulation and embrace of trade liberalisation that Mr Summers has been identified with – even if he insists his views have been caricatured.

In August, Ms Warren, with Bernie Sanders, the Senate’s most avowedly leftwing senator, authored an opinion piece entitled “Four questions for Fed chair candidates”, including whether the nominee would “work to break up ‘too-big-to-fail’ financial institutions so they could no longer pose a catastrophic risk to the economy”.

A former White House official said Mr Summers had shown “incredible disrespect” to Ms Warren when he was advising Mr Obama on the economy and she was under consideration to head a new consumer financial watchdog.

On the Republican side, Mr Summers has been demonised as the architect of Mr Obama’s first-term stimulus and the bailing out of the banks, both now heresy on large sections of the right.

A number of the key conservative activist groups, such as the Club for Growth and the Heritage Action Fund, have so far stayed on the sidelines of the debate over the next Fed chair.

But the American Principles Project, another rightwing group, which opposes all of Mr Obama’s potential nominees because of their support for Mr Bernanke’s looser monetary policy, has more specific complaints about Mr Summers.

“When grassroots groups on the right start to focus on this, they will oppose Summers because of his role in the stimulus,” said Rich Danker, the group’s director, adding that they intended to run campaign advertisements against him. “Bernanke already got 30 ‘no’ votes in his 2010 [confirmation], so I think that’s the baseline.”

Mike Crapo of Idaho, the top Republican on the banking committee, voted against Mr Bernanke in 2010, as did Richard Shelby of Alabama. They have not showed their hands so far on Mr Bernanke’s replacement.

Two Republicans who could vote for Mr Summers to help him through the committee to the full Senate for confirmation are Mike Johanns of Nebraska and Bob Corker of Tennessee.

Mr Johanns, who is not running for another term and thus does not feel exposed to a campaign against him from the right for supporting a controversial Obama nominee, said this week he was “open” to Mr Summers.

Unlike many Republicans, Mr Corker has been read to work with the White House but he departed Washington after the Senate closed this week in a fury over Mr Obama’s handling of Syria. The president, he said, seemed “uncomfortable” in his role as commander-in-chief.

Although Mr Summers’ nomination could provoke a debate on financial regulation and monetary policy, many Republicans might shy away from rejecting his nomination altogether.

But if he were nominated, he would land in a toxic environment on Capitol Hill. Tea Party-backed Republicans are pushing for a showdown with Mr Obama over the budget and “Obamacare”, which could lead to a government shutdown in October.

Mr Summers already faces the prospect of a turbulent nomination, but his passage would be even rougher if he were held hostage in the bitter budget fights. Mr Obama too, might think again about backing his former adviser if he finds himself fighting on too many fronts.

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments


Sign up for email briefings to stay up to date on topics you are interested in