Why Larry Summers Bailed on the Fed

Late Sunday afternoon, Larry Summers, the presumed frontrunner to replace Ben Bernanke at the Federal Reserve, withdrew his name from consideration in a letter to President Obama. The news came as a shock—but perhaps it shouldn’t have. Although Summers’s combative reputation helped sink his chances, he’s actually been a team player at key points throughout Obama’s presidency.

When Obama passed him over to choose Tim Geithner as Treasury Secretary, Summers accepted a job as director of the National Economic Council that was a step down. When Obama passed him over for Fed chairman and nominated Bernanke to a second term, Summers kept quiet. When it became clear last week that his nomination to succeed Bernanke might not survive the Senate, Summers did the honorable thing and withdrew, sparing Obama from having to expend still more political capital and sparing both of them the embarrassment of a failed vote.

Much of the initial reaction to Summers’s withdrawal focused on his problems with Senate Democrats, three of whom had signaled in recent days that they were going to oppose his nomination. A fourth, Massachusetts Senator Elizabeth Warren, had yet to weigh in publicly but is scheduled to give a big speech on the five-year anniversary of the financial collapse that could have made things even tougher.

But Summers’s real problem was going to be with the GOP: Even if he’d unified Democrats, he’d have needed at least a handful of Republicans to amass a filibuster-proof majority. That may well have proved impossible because Summers’s résumé seems tailor-made to antagonize Republicans. Consider how he embodies nearly every Republican bugaboo:

1. He was president of Harvard, reviled by the right wing as the leading bastion of smug, liberal elitism.

2. He was an architect of the dreaded stimulus, Dodd-Frank, and Obamacare.

3. He supported the auto bailout, the locus classicus of unwarranted state interference in private markets.

4. He’s a defender of “Too Big to Fail” banks (and a paid consultant to one of them), which have drawn growing conservative opposition.

5. He’s flamboyantly arrogant, in the manner that conservatives imagine most liberals to be.

Summers may be a brilliant economist, but even a mediocre one could do the math. Better to withdraw gracefully and preserve the possibility of a role in a future Democratic administration than to risk losing a Senate confirmation vote and see his political career come to a swift and decisive end.

[Joshua Green]


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