Banking/Financial Institutions

Obama defends Larry Summers against charges he is unfit to be Fed chairman

President Obama on Wednesday defended Larry Summers from liberal charges that the former Treasury secretary is unfit to head the Federal Reserve.

Addressing House Democrats in the Capitol, Obama emphasized that he has not yet chosen a replacement for Fed Chairman Ben Bernanke, who is expected to step down at the end of the year.

{mosads}Summers and Janet Yellen, the current vice chairwoman at the Fed, are widely considered to be the leading candidates for the top job at the central bank.

But the president argued that Summers, who headed Obama’s economic team in 2009 and 2010, has been wrongly attacked by some liberals and media outlets. 

The New York Times, for instance, recently endorsed Yellen in an editorial that criticized Summers’s handling of the president’s stimulus bill, and The Huffington Post has published a series of blistering columns this month attacking Summers as a corporate shill for his close ties to Wall Street.

Those charges, Obama told his troops, are off base.

Rep. Brad Sherman (D-Calif.) said after the meeting that Obama told the Democrats that “it’s unfair to criticize Summers for the fact that the stimulus bill wasn’t even larger, because who amongst us thinks that you could have passed a larger stimulus bill?” 

Obama cautioned the lawmakers “not to believe everything you read in The Huffington Post,” Sherman added. 

“He gave a full-throated defense of Larry Summers and his record in helping to save the economy in the dark days of ’09,” Rep. Gerry Connolly (D-Va.) said. Obama, he added, “felt that Larry had been badly treated by some on the left and in the press.” 

The president’s outreach effort took place as groups of liberal Democrats in both the House and Senate are gathering signatures lobbying him to pick Yellen as Bernanke’s replacement.  

The relatively rare decision by lawmakers to endorse a Fed candidate before the president has made a selection suggests Summers could face some difficulty getting confirmed. But Obama’s remarks suggest he is still a definite contender. 

Rep. John Larson (D-Conn.) emphasized “it was very clear that [Obama] has not made up his decision” on a Fed pick. 

“He has several candidates. He has not even begun the process,” Larson said. “But he was, I thought, very adamant in the defense of the service that Larry Summers has provided.” 

Senate Majority Leader Harry Reid (D-Nev.) acknowledged Wednesday that Democrats have differing opinions about which candidate is best suited to lead the Fed. But he also defended Summers as “a long-time friend” and “a very competent man,” and was quick to emphasize that the choice is ultimately Obama’s to make.

“That decision is up to the president,” Reid told reporters after Senate Democrats met with Obama. “Whoever the president selects, this caucus will be for that person, no matter who it is.” 

House Minority Leader Nancy Pelosi (D-Calif.) has waded into the debate as well, calling Yellen “extremely talented” and enthusing about the prospect of having a woman lead the Fed.  

“It would be great to have a woman — first woman chairman of the Fed, no question about it,” she said in an interview on Bloomberg’s “Political Capital with Al Hunt.” 

Like Reid, however, Pelosi said she would back whomever Obama selects. On Wednesday, she cautioned reporters against focusing excessively on the president’s defense of Summers. 

“It wasn’t really about Larry Summers,” Pelosi said after the meeting. “It was about how important this decision is. The ramifications of being chairman of the Fed will be there for a long time to come, recognizing that there are differing views in our caucus on the subject and how we go forward but understanding that whoever the president chooses will be received with respect by our caucus.” 

Obama’s defense of his former top economic adviser came in response to a question from Rep. Ed Perlmutter, a Colorado Democrat who reportedly told the president that Summers is a “bad choice” to lead the Fed. 

Sherman said Perlmutter did not voice his concerns with Summers “in detail.”

 “But he probably indicated that he wasn’t starting the Colorado chapter of the Larry Summers fan club,” Sherman added. 

White House press secretary Jay Carney said Obama would have defended any senior member of his economic team.

 “There is criticism of Larry Summers, and the president — as I would or others would — defended Larry’s tenure here,” he said. 

Asked if the White House would offer a similar defense of Yellen, Carney said he was not aware of similar complaints, but would be wary of commenting on the performance of an independent body like the Fed. 

At one point in the House meeting, Obama noted that 2012 marked his last campaign, giving him the advantage of not having to win another election. The comment drew a concerned reaction from freshman Rep. Eric Swalwell (D-Calif.), who told Obama that Democrats need him on the trail in next year’s midterms. 

“The president reassured him [Swalwell] that it was his last campaign, but he’s going to be campaigning [for Democrats],” said Rep. Peter Welch (D-Vt.). “He said he is well aware of why it is very important that Nancy Pelosi be Speaker.” 

— Russell Berman and Justin Sink contributed to this report.

— Updated at 1:31 p.m. and 7:44 p.m.

Tags Gerry Connolly Harry Reid Peter Welch
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