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Summers rises as Obama pick to head Fed

Former Treasury Secretary Lawrence Summers speaks on May 3, 2012 in Washington
Former Treasury Secretary Lawrence Summers speaks on May 3, 2012 in Washington.

Larry Summers, former chief economic adviser to President Barack Obama, appears increasingly likely to be his choice to succeed Ben Bernanke as Federal Reserve chief, according to US media.

Even though he has drawn criticism, notably from Obama's own Democratic Party, for being too cozy with Wall Street, Summers, 58, has the president's confidence after helping to lead the country out of recession, The Washington Post says, citing people close to Obama.

The White House remained mum Monday.

"We don't have any comment on personnel issues," a White House spokesman told AFP.

Obama has indicated he would announce his Fed nominee in the fall, which means it could come any time now. The president's nomination of the Fed chairman for a four-year term requires approval from Congress.

In late July, when several Democratic senators sent a letter to the White House calling for the nomination of Janet Yellen, the central bank's number-two, Obama vigorously defended Summers, a former Treasury secretary under the Clinton administration.

Obama "was defending Summers from attacks in the left and in the media that he felt were very unfair," said Gerald Connolly, a Virginia Democrat in the House of Representatives who witnessed the president's spirited defense.

"This was defending someone he sees as his friend and a loyal public servant," the lawmaker said.

However, seeing Summers's star rising in the press, some Democratic lawmakers in the Senate Banking Committee have suggested they would not support his nomination. Their defection augurs a difficult confirmation process in Congress.

Wielding the power over interest rates for the world's largest economy, which can impact other economies, the chairman of the Federal Reserve is often considered the second-most powerful leader in the United States.

US President Barack Obama stands alongside Larry Summers (R) at the White House in Washington September 3, 2010
US President Barack Obama stands alongside Larry Summers (R) at the White House in Washington September 3, 2010.

The current leader, Bernanke, 59, was tapped by Republican president George W. Bush to succeed Alan Greenspan in 2006 and steered the economy through the 2007-2009 Great Recession. His second four-year term ends on January 31.

Summers, a man of vaunted intelligence and experience in the halls of power on Wall Street, is also known for brashness that rubs people the wrong way. He would need to tone down this trait to operate in the consensus approach to policymaking in the Federal Open Market Committee.

His past record also indicates a reluctance to regulate financial markets although such regulation is part of the Fed's purview.

And his links with some of the biggest companies on Wall Street would also draw close congressional scrutiny if he is nominated.

By contrast, the other leading candidate for the job, Yellen, has a long history of accomplished service on the Fed, and currently is the vice chair of the Fed board headed by Bernanke.

But the former chief of Clinton's Council of Economic Advisers does not enjoy the links that Summers forged with the White House inner circle when he was the council chief at the peak of the financial crisis.

According to The Wall Street Journal, Yellen recently expressed privately her doubts that she would be nominated.

The Obama administration also is facing nominations for several other posts on the Federal Reserve Board after several departures, and is leaning toward nominating women.

The Treasury's under secretary for international affairs, Lael Brainard, 50, is a front-runner for a seat on the seven-member board, all of whom serve on the FOMC, The Wall Street Journal reported.

A Treasury spokesman declined to comment on her potential nomination on Monday.

The choice of the top female financial official could sweeten the chances for Summers to clinch the appointment over Yellen, who would be the nation's first female Fed chief, the Journal said.

Among the Fed board departures are Sarah Bloom Raskin, recently nominated deputy Treasury secretary, and Elizabeth Duke, who stepped down at the end of August.

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