Senate Democrats Would Question Summers for Fed – Durbin

The Senate’s second-ranking Democrat said he would “have a lot of questions” if former Treasury Secretary Lawrence Summers is chosen to replace Federal Reserve Chairman Ben S. Bernanke.

Senator Richard Durbin’s comments in an interview at the Capitol mirror skepticism among some Senate Democrats about a possible Summers nomination. Durbin is among 20 senators in the Democratic caucus who signed a July 26 letter to the White House praising Federal Reserve Vice Chairman Janet Yellen and urging President Barack Obama to nominate her to lead the central bank.

“If Summers is the nominee, I sure would have a lot of questions to ask him,” Durbin of Illinois said yesterday. “He’s served several administrations, and I’d like to hear his point of view on the role of the Fed in terms of helping the middle class and creating jobs.”

Although the letter didn’t mention other potential candidates, it shows that Yellen is gaining support for the nomination and possible difficulties Summers, if nominated, may encounter in winning Senate confirmation.

Last month, Obama said Bernanke had stayed in the post “longer than he wanted,” though the Fed chairman hasn’t indicated whether he would seek or accept a third term. Bernanke’s second four-year term ends Jan. 31.

White House spokesman Josh Earnest told reporters yesterday that Obama has made clear “that this is something he’s been thinking about for some time, and I think he has his own pretty strongly held ideas about what he’d like to see there.”

Leaving Mark

White House officials have begun to focus on how Obama will leave his mark on the central bank. An administration official, who asked not to be identified in discussing internal planning, said July 26 that Obama won’t nominate a successor until at least September.

As lawmakers prepare to leave Washington at week’s end for a five-week summer break, some Democratic senators are becoming more vocal in backing Yellen and raising concerns about Summers’s role in advocating deregulation during President Bill Clinton’s administration.

In 1998 Summers, then-Fed Chairman Alan Greenspan and Treasury Secretary Robert Rubin 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 financial market crisis.

Summers also sought repeal of the Glass-Steagall Act, the Depression-era law separating commercial and investment banking.

‘Extraordinarily Skeptical’

“I start from a position of being extraordinarily skeptical that his background is appropriate for the role of the head of the Fed,” said Senator Jeff Merkley, a Democrat on the Banking Committee who signed the letter, said today in an interview.

“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.

Summers spokeswoman Kelly Friendly declined to comment.

“The letter was not about this, I want to make that clear, but there is obviously a lot of opposition here to Summers,” said Senator Sherrod Brown, an Ohio Democrat who is a member of the Banking Committee.

Brown, who approached lawmakers on the Senate floor July 25 to gain their signatures, said he hadn’t received a response from the White House.

“I don’t expect feedback, and I don’t expect them to say, ‘we agree’ or ‘we don’t agree,’” Brown said today in an interview. “I just want him to know that Yellen has a lot of support. That’s what the letter’s about.”

More Signatures

Brown said he could have gotten another half-dozen signatures if he’d extended his effort another day or two before sending the letter. That would be almost half of the chamber’s 54 Democrats.

Other senators who said they signed the letter are Barbara Boxer and Dianne Feinstein of California, Tom Harkin of Iowa, Angus King of Maine, Jay Rockefeller of West Virginia, Mark Udall of Colorado, Elizabeth Warren of Massachusetts and Sheldon Whitehouse of Rhode Island.

All are Democrats except King, an independent who caucuses with the Democrats.

Warren is also a member of the Banking panel, which would vote on the Federal Reserve chairman nomination. Democrats have a two-seat edge on the committee, meaning opposition to a candidate from three Democrats may spell trouble for a nominee if all the Republicans opposed the choice.

Courtesy of Bloomberg News

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