ECONOMICS SEPTEMBER 9, 2013
It has become glaringly obvious over the past couple months that President Obama wants to nominate Larry Summers to become the next chair of the Federal Reserve. According to CNBC’s John Harwood, Obama feels he “owes” Summers for his willingness to serve the country during the first-term response to the Great Recession.
But might a Summers nomination be D.O.A. in the Senate? Outside groups have already plotted behind the scenes to stop Summers; his allies in the White House will doubtlessly respond with a campaign of their own. But Summers’ biggest obstacle is simple math: He has to be able to count to 12.
Twelve is the number of votes Summers would need to advance out of the Senate Banking Committee, which poses the biggest challenge to confirmation. Generally speaking, a presidential appointee cannot advance to the executive calendar and a final Senate vote without a positive recommendation from the committee of jurisdiction. The last time a committee nearly derailed a high-profile nominee domination was John Bolton’s appointment as U.N. Ambassador in 2005. Eventually, Bolton’s nomination went to the full Senate under highly unusual circumstances. Republican Senators George Voinovich and Lincoln Chafee did not support Bolton, but they agreed not to block the nomination if the committee advanced Bolton to the floor with "no endorsement" instead of a recommendation.
It’s unclear whether anti-Summers Democrats will give the same leeway. The Wall Street Journal, citing unnamed Senate aides, suggested that three Banking Committee Democrats would oppose Summers: Sherrod Brown, Jeff Merkley and Elizabeth Warren. The three have created an ad hoc pro-financial reform coalition inside the committee, dedicated to tighter regulations and more vigorous policing of Wall Street. Warren told me last month that she greatly respected Brown and Merkley, and saw them as forming “a core of people really engaged with the issues.”
Sherrod Brown has already gone public with his opposition to Summers. He circulated the letter urging Obama to choose current Fed Vice Chair Janet Yellen for the position. Neither Merkley nor Warren have publicly stated they would oppose Summers in committee, and the Journal report didn’t come from either of their offices. But Merkley has been quite critical of a potential Summers choice from the moment it was floated. “If you nominate someone who is a life-committed deregulator to be in a regulatory position … why is this person appropriate?” he asked Bloomberg in late July.
For Warren’s part, she and Summers have sparred for years, owing to their different worldviews about the role of the financial sector in the economy. Speaking of Summers and Timothy Geithner on the "Charlie Rose Show" in 2010, Warren said, “I think they approach the economy and the world through the largest institutions ... I spent 25 years somewhere else.” Summers reportedly opposed picking Warren as the inaugural director of the Consumer Financial Protection Bureau.
Democrats hold a 12-10 advantage on the committee, and a tie means no advancement. So every Democrat Summers loses must be made up for by a Republican willing to cross the aisle. Though no Republican has yet come forward to support Summers, one can imagine Bob Corker and Mike Johanns, who voted in committee to advance Ben Bernanke for a second term at the Fed in 2009, offering their votes. But after that, it becomes harder to figure. Mark Kirk and Dean Heller are potential targets, but not guarantees. It may hinge on whether Mike Crapo, the ranking Republican on the Banking Committee, wants to enforce party discipline.
Moreover, Summers may need more than three votes. Heidi Heitkamp and Joe Manchin, both newcomers on the committee, have not stated their positions on a potential Summers nomination. Both of them come from red states (North Dakota and West Virginia) that are skeptical of the banking establishment, and both perceive political benefit from showing independence from a president whom their constituents don’t like. Witness the position of another red state Democrat, Alaska’s Mark Begich. Though not on the Banking Committee, Begich said he would oppose the Summers nomination on the Senate floor, citing his indifference to the foreclosure crisis. He planned to write a letter to the White House detailing his concerns with the choice.
Begich’s opposition shows what a heavy lift the White House would have maneuvering Summers through a skeptical Democratic caucus. Nineteen Democrats and independent Angus King signed the Sherrod Brown letter supporting Yellen. One Senate aide told me that the nomination would “tear the caucus apart,” and that such a bitter nomination battle would simply not be worth the effort. No Federal Reserve chairman has ever received less than 70 votes on the Senate floor (Ben Bernanke in 2009). A brutal process that ends with Summers squeaking by, or losing, would damage the White House’s ability to get support from Congress on just about anything.
That’s doubly true in the context of this week’s Senate vote authorizing military force against Syria. Political capital is a finite resource, and the White House having to struggle to put together a coalition for Summers after doing the same tough work on Syria may be too much of a lift, especially amid difficult upcoming votes on the budget and the debt limit.
Participants in the grassroots campaign to stop Summers think that over the past week, the momentum has shifted in their direction. Providing intellectual heft to the fight was a high-profile New York Times piece over the weekend by Nobel Prize-winning economist Joseph Stiglitz, who hammered Summers, arguing that his “conduct and judgment in the crises was as flawed as his lack of commitment in that regard.” While labor has not added financial resources to the anti-Summers coalition, AFL-CIO President Richard Trumka did say in a briefing yesterday that “we think Yellen has earned the right to head the Fed,” praising her attention to the full employment mandate and her early predictions of a potential financial crisis. It’s hard to find one member of the labor-left alliance who would be enthused by a Summers selection.
The White House, for its part, has counter-punched by floating top Treasury Department official Lael Brainard as a potential Fed Governor, filling one of several upcoming vacancies. Appointing a woman to one of those lesser positions could blunt criticism of sexism if Summers is chosen over Yellen.
But the White House clearly recognizes the stakes of a Summers fight, especially if they cannot find the votes to push it through. That’s why the announcement, initially expected this week, has been delayed, at least beyond the Syria vote and perhaps not until October, as the vote-whipping process continues. Senators opposed to the nomination understand that it would be better for everyone involved to stop this process before it starts, and have articulated to the White House the difficulties of advancing Summers. Senate skeptics have held a series of internal discussions, particularly on the Banking Committee. And that’s all before the confirmation hearings, with Summers on the hot seat over past statements and policy preferences. Said one observer close to the process: “There will be fireworks at the committee if Summers is nominated.”
David Dayen is a contributing writer at Salon.