Senate Democrats are wading into White House deliberations over a replacement for Federal Reserve Chairman Ben Bernanke when his term expires in January, taking unusual steps to influence monetary policy in response to reports that President Obama’s favored candidate is his former economic adviser Larry Summers.
Led by Sen. Sherrod Brown of Ohio, a lawmaker known for populist views, a group of liberal Democrats is writing a letter to Obama urging him to pick Janet Yellen, the current vice chair of the Fed, for the top spot.
In the letter, a version of which was obtained by the Washington Post, the senators write that Yellen has an “impeccable resume” based on her tenure as vice chair, role as an economic adviser to President Bill Clinton, academic work at Berkeley, and past work as president of the San Francisco Fed. The senators recommend Yellen, known as one of the more dovish members of the Fed, based on her “focus on returning our economy to full employment” and willingness to regulate Wall Street.
The letter’s signatories have not been disclosed, but they comprise about a third of Senate Democrats and include Sen. Patty Murray of Washington, a member of Senate Democratic leadership, Jeff Merkley of Oregon, and Tom Harkin of Iowa, according to reports from the Washington Post and Bloomberg.
Coming in the wake of reports that the White House is leaning toward Summers, formerly president of Harvard and currently professor there, as a replacement for Bernanke, the letter could be read as a warning to the president not to nominate Summers, and as an attempt to exert unusual congressional influence over the independent central bank.
Bob Eisenbeis, chief monetary economist for Cumberland Advisors and a former executive vice president of the Atlanta Fed, said the letter’s authors are sending a signal that Yellen is “confirmable” and “trying to forestall embarrassment” over potential confirmation problems if Summers is the nominee.
Eisenbeis remarked that the letter represented an unusual incursion of Congress into monetary policy decisions, which are managed by the Federal Reserve System to minimize political influence. “When’s the last time they sent a letter ahead of a vacancy?” Eisenbis also said that “it’s the president’s responsibility to pick a Fed chair, not Congress’.”
Some of the Democrats involved have been explicit about their disapproval of Summers as a possible Fed chief. After Ezra Klein at the Washington Post and Ben White at Politico reported that White House sources identified Summers as the leading candidate for the Fed’s top spot, Merkley said on Twitter Tuesday: “Larry Summers for Fed Chair? Disconcerting… many questions to answer.” Previously, Janet Yellen had been regarded the frontrunner for the job in polls of economists and prediction betting markets.
Many liberals are skeptical of Summers because of his role in efforts to deregulate finance in the 1990s as a member of Clinton’s Treasury Department, and also because of doubts about his commitment to monetary stimulus. The news that Summers and not Yellen might be the president’s preferred candidate was greeted with uproar from progressive commentators earlier in the week.
The progressive finance journalist David Dayen wrote that Summers has “perhaps the worst track record of any major economic figure in America” in a Salon article titled “Larry Summers will destroy the economy (again).” Roosevelt Institute analyst Mike Konczal wrote in a Friday op-ed for Politico that Summers “was simply missing in action” during monetary policy discussions over the past few years, while Yellen was leading them.
House Minority Leader Nancy Pelosi also boosted Yellen, calling the Fed vice chair “extremely talented” and saying that “it would be great to have a first woman chair of the Fed” on Bloomberg’s Political Capital. Pelosi also suggested that she would support any selection by the White House.
The Associated Press reported Friday that White House officials do not expect President Obama to name a new chairman until the fall.