Despite the best efforts of White House insiders, the backlash against the candidacy of Larry Summers to be the next Fed chair proved too much to overcome.
From the scoop by David Wessell of the Wall Street Journal:
Lawrence Summers, a former U.S. Treasury secretary, called President Barack Obama Sunday to say he is pulling out of the contest to succeed Ben Bernanke as chairman of the Federal Reserve.
A Venn diagram would show that the circles for “politics” and “stuff about which FT Alphaville can write intelligently” don’t overlap.
But as far we can tell, the exit by Summers doesn’t necessarily clear the path for FT Alphaville’s preferred choice, Janet Yellen. (Earlier endorsements here and here.) Other candidates that can’t be ruled out include Don Kohn, Roger Ferguson, and Tim Geithner.
Kohn’s role as consigliere to Ben Bernanke during parts of the financial crisis and its aftermath might appeal to the president, whose advisers have leaked their (and presumably his) preference for a candidate who is battle-tested. And as Matt Yglesias writes, Obama heavily favours people with whom he has previously worked, which is why Geithner has an outside chance.
But our guess — and it’s just a guess — is that Yellen is now the clear frontrunner.
She has a large and vociferous political backing that was mobilised when it was believed that Summers was her only competition. To the extent that we actually know anything about the White House’s reasons for scepticism about her, those reasons haven’t been compelling.
Obama himself has also said publicly that the differences between Summers and Yellen regarding how they would approach the job are “so small that you couldn’t slide a paper between them”. At the time this was meant as a defence of Summers, who was clearly the president’s first choice. But he’s out, and if the Obama believed that their differences were so small, then that now becomes a strong justification for picking her.
But given all that’s happened in Washington in just the past few weeks, we’re not placing any bets.