Former U.S. Treasury Secretary Lawrence Summers has suspended ties with Citigroup Inc. (C:US) while the White House considers nominating him to serve as the Federal Reserve’s next chairman, the company said.
“Mr. Summers has withdrawn from participation in all Citi events while he is under consideration to be chairman of the Federal Reserve,” Danielle Romero-Apsilos, a spokeswoman for the firm, said yesterday in an e-mailed statement.
Summers, a Harvard University Professor and former top economic adviser to President Barack Obama, was to give the keynote address on challenges to the global economy at a Citigroup research seminar Oct. 13, according to an invitation on the website for the firm, the third-biggest U.S. lender. The Washington event coincides with the annual meetings of the World Bank and the International Monetary Fund.
Citigroup hired Summers, 58, “for small private-bank client and institutional client meetings,” Romero-Apsilos said in an earlier e-mailed statement. He provided “insight on a broad range of topics including the global and domestic economy.”
Kelly Friendly, a spokeswoman for Summers, declined to comment.
Donald Kohn, 70, a former Fed vice chairman who is now a senior fellow at the Brookings Institution, is also listed as a speaker at the Citigroup event. Kohn declined to comment.
Obama mentioned Summers, Kohn and Fed Vice Chairman Janet Yellen, 67, as potential candidates to lead the central bank in a meeting with legislators in July. Ben S. Bernanke’s term as Fed chairman expires Jan. 31.
Part of the next Fed chairman’s job will be overseeing the largest bank holding companies, assuring their safety and soundness and implementing dozens of new regulations under the 2010 Dodd-Frank Act that could crimp their profits. The Fed is a direct supervisor of New York-based Citigroup and annually tests it and other large banks’ durability against financial stress.
While Obama hasn’t decided on a nominee, according to a Twitter posting yesterday by White House spokeswoman Amy Brundage, Summers faces opposition from Senate Democrats concerned about his ties to financial institutions. He was an advocate of financial deregulation before a meltdown in U.S. mortgage finance led to the near-collapse of the banking system in 2008.
Senator Jeff Merkley, a Democrat from Oregon, said in a July interview that he was “extraordinarily skeptical” about the possibility of a Summers appointment.
“If you nominate someone who is a life-committed deregulator to be in a regulatory position, and if you believe regulation is necessary to prevent fraud, abuse, manipulation and so forth, then there’s a lot of questions to be asked: Why is this person appropriate?” Merkley said.
Senator Jon Tester, a Democrat from Montana, and Senator Sherrod Brown, a Democrat from Ohio, indicated yesterday that they would vote against a Summers nomination.
Brown is a “likely ‘No’” vote if Summers is nominated, spokeswoman Meghan Dubyak said. Tester wouldn’t support Summers, spokeswoman Andrea Helling said.
The three lawmakers are on the 22-member Senate Banking Committee, which votes on a nominee to the top Fed post before final consideration by the full Senate. Democrats hold 12 of the panel’s seats.
The U.S. Senate, controlled 54-46 by Democrats, will need Republican votes to reach the 60-vote threshold that has become required to put aside a filibuster and move forward with most nominations. Earlier this summer, 20 senators, including 19 Democrats and one independent, signed a letter of support for Yellen.
Forty percent of investors, analysts and traders who are Bloomberg subscribers see Summers getting the job, compared with 33 percent for Yellen, according to a Bloomberg Global Poll conducted Sept. 10.
Summers served Obama as head of the National Economic Council in 2009-2010. Citigroup received a $45 billion bailout during the turmoil, which it later repaid.
Kohn was Bernanke’s top adviser during the financial crisis and is currently a member of the Bank of England’s Financial Policy Committee, a new unit specifically charged with removing or reducing systemic risk.
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