August 25, 2009 / 4:25 PM / 11 years ago

Bernanke stays but Summers is no odd man out

WASHINGTON (Reuters) - U.S. President Barack Obama spared himself one big potential headache by deciding to keep Ben Bernanke in the central bank chief’s job rather than turning to his adviser Lawrence Summers.

Already challenged by Congress on his healthcare and climate change policies, the president — only seven months in the job — could well have faced one more tough fight over so controversial a choice as the blunt-spoken Summers.

This way Obama may be counting on the best of both worlds. His choice signals a desire for stability — with Bernanke, 55, at the Federal Reserve and Summers, 54, still well entrenched as head of the White House National Economic Council.

“Nobody can do what Summers does as the president’s right-hand man on the economy,” an administration official said when asked about reports that Summers had had ambitions for the Fed job.

The official said Summers, White House chief of staff Rahm Emanuel and Treasury Secretary Timothy Geithner all backed Bernanke’s renomination.

A former Treasury Secretary, Summers is known for both an outsized intellect and a sometimes brusque manner. While president of Harvard University in 2005, he got in trouble for suggesting women might have less innate ability in science than men.

He heads the National Economic Council, a White House job that — unlike the Fed job — requires no Senate confirmation.

Had Obama chosen his close adviser Summers, the markets may have reacted negatively out of concern that the Fed’s independence could be compromised.

Summers is a Democrat like Obama. Bernanke is a moderate Republican first appointed by President George W. Bush.

As of Monday, market players betting on Intrade viewed Bernanke’s renomination as the most likely outcome by a 3-to-1 margin.

By bypassing Summers, Obama was not signaling any lack of confidence in his top economic adviser but instead was playing it safe.


Former Bush administration official Tony Fratto said Obama made the only logical choice.

“Swapping Fed chairmen in the current environment would have been an unnecessary risk, and potentially disruptive,” Fratto wrote on his blog, The Roosevelt Room.

“A new chairman stepping in to complete the unfinished business of the central bank at this time would lack the confidence of market participants, economists, and foreign counterparts, and would have only added to uncertainty going forward,” Fratto wrote.

When Obama chose Summers late last year to run economic policymaking within the White House, some analysts had predicted that Summers’s rough edges might lead to rivalries with some colleagues on the economic team, including Geithner.

There have been few public indications of major frictions with the other high-powered economists, including Council of Economic Advisers Chairman Christina Romer.

There was widespread speculation that by taking the White House economic job, Summers was biding his time in hopes of being named chairman of the powerful central bank once Bernanke’s term expired in January 2010.

Summers has tended to keep a somewhat low public profile, appearing occasionally on television talk shows and delivering a handful of speeches at select venues while Geithner and Obama have been the main economic spokesmen for the administration.

He could still have a crack at the Fed job in 2014.

Additional reporting by Ross Colvin; editing by Howard Goller

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