Larry Summers, a former economic adviser to President Obama, is one of the… (Chip Somodevilla/Getty…)
Democratic lawmakers and top economists are mystified that he’s being eyed for Federal Reserve chairman, the most powerful economic post in the world. Women’s groups are apoplectic about it. Even investors are worried.
But Lawrence H. Summers has at least one key supporter who is unlikely to harbor concerns: President Obama, who is strongly considering nominating him in coming weeks to replace Ben S. Bernanke at the Fed.
As Summers’s candidacy has vaulted to the forefront this summer, his record has produced two vastly different assessments. Critics cannot believe Obama would nominate Summers, who they say helped sow the seeds of the financial crisis while in the Clinton administration, insulted women as president of Harvard University and alienated colleagues at the White House.
“Why would the president look to someone with a deregulatory background who didn’t fight for the middle class and who doesn’t have the personality for wrestling with ideas in a way that’s valuable for Fed chair?” said a vocal critic, Sen. Jeff Merkley (D-Ore.). “I have no answer for that. No one I know has an answer for that.”
The answer, according to many people who saw their relationship up close, is that Obama developed great faith in the man who was his top economic adviser as he confronted historic crises at the beginning of his presidency.
Where others see Summers as combative, likely to cause clashes at fragile moments, Obama sees an urge to consider every option in the face of a crisis, according to longtime advisers. In a future crisis, Summers is someone who would apply the same brand of forceful intervention that was the hallmark of Obama’s own response, they said.
And where others see little regard for Main Street, Obama sees a focus on how the government can do more to bolster the economic prospects of poor- and middle-class Americans, and someone who would carry those concerns to the Fed, which has vast powers over interest rates and the financial system.
“He was just a huge resource to the president at a time when it was desperately needed,” said David Axelrod, Obama’s longtime political adviser. “The president then and now, I believe, had very high regard for Larry, and, because he saw it firsthand, I’m sure he has no doubt that Larry has the depth and intellectual acuity to handle the job.”
As Summers’s name has circulated as a leading candidate in recent weeks, the White House has discouraged speculation about whom Obama is going to pick, saying he is considering a range of candidates and will not decide until the fall.
Summers’s chief rival for the job is Fed Vice Chairman Janet Yellen, an architect of the Fed’s current policies to reduce unemployment. She faces wide backing and virtually no criticism. Summers, meanwhile, has drawn his support mainly from current and former Obama aides.
One summer day a little over four years ago, Summers was summoned to the Oval Office. Bernanke’s term as Fed chairman was soon expiring, and Obama was considering naming Summers to the job — one that he long coveted.
But in a short and unemotional conversation, Obama told him he was reappointing Bernanke. Not only did he want continuity at the Fed, but the president said he needed Summers by his side in the White House as he tried to lift the economy out of a deep recession, according to people familiar with the conversation.
Obama had come to rely on Summers, who had fought financial panics in Latin America and Asia in the 1990s as a top official in the Treasury Department, to help him manage an overwhelming series of crises.
As director of the National Economic Council, essentially the mastermind of economic policymaking within the White House, Summers was the principal writer of the president’s stimulus plan to restart economic growth. He worked with then-Treasury Secretary Timothy F. Geithner on a proposal to stabilize the banks. He was the architect of a plan to help struggling homeowners. And he helped shape the decision to bail out the auto industry.
“Larry was advising the president that what was really needed was overwhelming force on all fronts,” said Chicago Mayor Rahm Emanuel, Obama’s first chief of staff. “Larry was the point person to help take a lot of individual concepts and ideas and put them into a coordinated music sheet.”
People who know Summers say that as Fed chair — usually the first responder in a foreign or domestic financial crisis — he would apply the same principle.
“He’s for overwhelming force and with the presumption that, certainly in a financial crisis, the government is a central part of the solution,” said a former senior administration official who is still in touch with Summers and who spoke on the condition of anonymity to discuss Summers’s views before a nominee is announced.