David Wessel has the scoop: Larry Summers has bowed to reality and is withdrawing from consideration as Fed chair. His last-minute attempt to distance himself from Citigroup was far too little, far too late: with Democratic opposition in the Senate only getting harder, it was at this point more likely than not that any Summers nomination would actually fail to get through Congress.
Michael Hirsh’s anti-Summers National Journal cover story landed on the desks of everybody who matters in Washington at the end of the week, and it had its intended effect: no matter how much the White House wanted Summers to get the job, those pesky Constitutional checks and balances would conspire to ensure that it would never be his.
This is extremely good news, of course. Summers was the wrong man for the job, and his withdrawal leaves the door wide open for the best-qualified candidate, Janet Yellen, to step into the chairmanship. Summers simply shouldn’t be a leader of any major institution: he’s too cocksure, too abrasive. He failed at Harvard; since then, his metier has been that of consigliere: quietly (or not so quietly) whispering in the ear of real leaders like David Shaw or Barack Obama. He’s good at that. But Summers has tasted real power, first at Treasury and then at Harvard, and is young enough, and ambitious enough, to want to relive the experience.
It’s not going to happen — not at any major public institution, in any case. Summers didn’t become Treasury secretary, when Obama first took office; he didn’t become the head of the World Bank; and he has now failed twice to become Fed chair. That’s it: four strikes, and he’s done. He is now free to make many millions of dollars in the private sector — or, rather, to continue to make many millions of dollars in the private sector, since he’s a prime example of a man who revolves straight into highly-paid consultancies the minute he leaves government.
The presumptive-nominee status of Yellen will leave a bad taste in many White House sources’ mouths — they’ve been quietly briefing against her for months, and the unedifying spectacle of seeing the Fed chairmanship turn into a horse race has done her no particular favors. Obama should know, however, that if he nominates any man whatsoever for the job, the howls from women will be heard very loudly indeed.
The real lesson of the past few months, however, is that the Fed chairmanship should never become a political football. If Obama wanted to nominate Summers, he should have just done so, rather than raising a trial balloon in July and then letting it slowly deflate. Both Alan Greenspan and Ben Bernanke were nominated by a Republican and then re-nominated by a Democrat: that above-politics status is exactly as it should be. I hope that Washington will learn from this debacle, and that if the Republican candidate wins the next presidential election, he or she will feel free to re-nominate Janet Yellen. That would be the sign we all need that the Fed chair is a technocratic position, not a political one.