Bloomberg News

Obama, Reid Aides Said to Discuss Fed Deliberations After Letter

August 14, 2013

Aides to President Barack Obama and Senate Majority Leader Harry Reid discussed the process of choosing the next U.S. Federal Reserve chairman in the wake of a letter from some chamber Democrats touting one contender, according to a person familiar with the conversations.

The letter, signed last month by 19 Senate Democrats and one independent who caucuses with the party, urged Obama to nominate Fed Vice Chairman Janet Yellen to succeed Ben S. Bernanke, whose term expires Jan. 31. The letter emerged amid criticism from some Democrats of another possible contender, Lawrence Summers, who had served as Obama’s first National Economic Council director.

The Fed selection process came up during a meeting between Deputy White House Chief of Staff Rob Nabors and David Krone, chief of staff to Reid, a Nevada Democrat, said the person familiar with the discussion. The two officials meet about once a week, according to a congressional aide who asked not to be identified discussing private conversations.

Senior White House staff members were surprised by the Democrats’ letter, especially given that the president has made clear he hasn’t yet settled on a nominee, said the person familiar with the meeting. Although Obama hasn’t raised the issue of the letter specifically, he wants political breathing room as he makes a final decision on Bernanke’s replacement, the person said. The Wall Street Journal reported on the meeting earlier.

During a White House news conference last week, a day before leaving for vacation, Obama said he was weighing a “range of outstanding candidates” to lead the central bank, including Summers and Yellen.

‘Inside Track’

“The perception that Mr. Summers might have an inside track simply had to do with a bunch of attacks that I was hearing on Mr. Summers pre-emptively, which is sort of a standard Washington exercise that I don’t like,” Obama said. “I tend to defend folks who I think have done a good job and don’t deserve attacks.”

Obama, 52, told House Democrats during a closed-door meeting July 31 that Summers was being unfairly criticized. In his news conference, he compared Summers to his National Security Adviser Susan Rice. Obama didn’t nominate her for Secretary of State after a backlash over statements she made following the attacks on a U.S. diplomatic outpost in Benghazi, Libya, last September in which four Americans died.

Reid said after a July 31 meeting between Obama and Senate Democrats that party members in his chamber would support the president’s choice for the Fed, “no matter who it is.”

Decision Timeline

For the Fed position, Obama said he’ll make a decision “in the fall” on a replacement forBernanke, 59. The president told House lawmakers that he was also considering former Fed Vice Chairman Donald Kohn, 70, for the job.

Yellen, 67, has been the Fed vice chairman since October 2010. Summers, who served as Treasury secretary from July 1999 to January 2001, returned to government in 2009 as National Economic Council director during Obama’s first term.

Some Senate Democrats, including Richard Durbin of Illinois, have publicly questioned whether Summers should lead the Fed. They’ve raised concerns about his role in advocating financial-industry deregulation during President Bill Clinton’s administration that many blame for later helping create the financial crisis.

Summers, then-Fed Chairman Alan Greenspan and Treasury Secretary Robert Rubin in 1998 blocked efforts by Brooksley Born, then-chairman of the Commodity Futures Trading Commission, to regulate the derivatives market. It later expanded to include the toxic instruments that led to the 2008 market crisis.

While Bernanke hasn’t said whether he’d be willing to stay for a third term, Obama indicated in a June interview with Charlie Rose that the Fed chief had stayed in the post “longer than he wanted.”

To contact the reporter on this story: Margaret Talev in Washington at mtalev@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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