Yellen's Fed Candidacy Gains With Schumer Nod, White House Calls

Thursday, 19 Sep 2013 07:12 AM

 

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The prospects of Janet Yellen becoming the next U.S. Federal Reserve chairman increased as White House officials began gauging lawmakers’ support and she won the backing of a top Senate Democrat.

Senator Charles Schumer, the chamber’s No. 3 Democrat and a senior member of the Banking Committee, Wednesday called Yellen, currently the Fed’s vice chairman, an “excellent choice” to succeed Ben S. Bernanke when his term expires on Jan. 31.

President Barack Obama’s aides, meanwhile, have begun making calls to U.S. Senate offices to discuss the process of selecting the next central bank chief, mentioning Yellen by name, according to three Senate Democratic staff members.

Declassified: ‘Financial War’ Could Wipe Out 50% of Your Wealth

The developments suggest that “the appointment of Yellen is coming and it’s coming soon,” Sarah Binder, a senior fellow at the Brookings Institution who studies the relationship between the Fed and Congress, said in an interview. “Given they said they’d limit themselves to whoever was already on the shortlist, the Yellen appointment has the highest prospects of going the most smoothly.”

White House officials didn’t tip their hand on when the selection might come or whether the president has settled on anyone, according to the Senate aides, who asked not to be identified to discuss the private calls. People familiar with White House discussions have said Yellen is the leading candidate for the post, while saying that a decision may extend into next week or beyond.

Summers Withdraws

The calls to senators’ offices follow the decision by former Treasury Secretary Lawrence Summers to withdraw his name from consideration, announced Sept. 15. Yellen’s support from Schumer, of New York, adds a prominent voice to the chorus of Democrats who have been pushing for her selection.

“Now that Summers has pulled out, I think the president should choose Yellen,” Schumer said in response to a question at a news conference in Washington. Yellen would be the first woman to head the U.S. central bank.

In backing Yellen, 67, Schumer joins the chamber’s No. 2 Democrat, Richard Durbin of Illinois and 19 other members of the Senate Democratic caucus who took the unusual step of signing a July 26 letter urging Obama to nominate Yellen.

“One of the great ironies is Summers was tagged with being the Wall Street guy, but actually many people on Wall Street have preferred Yellen not because of any of her views on deregulation but because she has been so good at predicting where the markets would go,” said Schumer, who didn’t sign the letter.

‘Very Close’

David Gergen, an adviser to Republican and Democratic presidents from Richard Nixon to Bill Clinton, said that the Obama administration appears “to be very close” to a decision on a nominee. Speculation after Summers withdrew that Obama might choose a third candidate “seems to have died down now and all the focus is on Janet Yellen.”

The president’s nominee to succeed Bernanke, 59, is subject to Senate confirmation, which means the process will have to include time for hearings by the Banking Committee. Obama has a full schedule over the next two weeks.

Obama plans to be in New York Sept. 23 and Sept. 24 for the United Nations General Assembly meeting. He’s scheduled to leave for a six-day trip to Asia beginning Oct. 6. In between, the administration will negotiate with congressional Republicans on a spending bill to avoid a federal government shutdown at the start of the fiscal year on Oct. 1.

Although the senators’ pro-Yellen letter didn’t mention Summers, 58, by name, several signers later said they would oppose his nomination.

Merkley Call

At least four Democrats on the Banking Committee, which has jurisdiction over Fed nominees, said they wouldn’t support Summers. They are Montana’s Jon Tester, Oregon’s Jeff Merkley, Massachusetts’s Elizabeth Warren and Ohio’s Sherrod Brown, who circulated the July letter. Democrats have a two-seat edge over Republicans on the panel.

Merkley called the White House on Sept. 13 to notify the administration that five Democrats on the banking panel would vote against Summers, according to a Senate Democratic aide. North Dakota Senator Heidi Heitkamp was the fifth Democrat opposed to Summers, according to a Senate aide.

“Mr. Summers read the situation correctly: He was going to have an extremely difficult time in the banking committee and even among Democratic senators,” Durbin said in an interview at the Capitol on Sept. 17. “And I think he’s right. If he’d have gone forward, there would have been a pretty bitter fight.”

‘Love Fest’

Gergen predicted there would be enough Republican support for Yellen to easily win Senate confirmation. “They have other fights to fight right now,” referring to Republican lawmakers’ battles with the Obama administration over measures to fund the government and raise the U.S. borrowing limit.

“I would imagine that she would get a very positive and substantial vote,” said Gergen, now a professor at Harvard University’s Kennedy School of Government. “I would assume that this would be more of a love fest on Capitol Hill than anything else.”

Declassified: ‘Financial War’ Could Wipe Out 50% of Your Wealth

While a small camp has indicated they’d probably oppose whoever Obama chooses, most Senate Republicans have refused to say who they’d support. They are deflecting questions by saying that they would wait to see who Obama selected before making a determination.

“It’s the president’s choice to make and whenever he makes one, we’ll take a look at it,” the Senate’s top Republican, Mitch McConnell of Kentucky, said in a Sept. 16 interview at the Capitol. “We’ll look at whoever is nominated.”

© Copyright 2014 Bloomberg News. All rights reserved.

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