Federal Reserve Vice Chairman Janet Yellen is President Barack Obama’s top candidate to lead the central bank even after her supporters helped force his initial favorite to withdraw, according to people familiar with the process.
Lawrence Summers, Obama’s former economic adviser, removed his name from consideration rather than face what he said would be an “acrimonious” confirmation process. Summers was targeted by Yellen’s backers who said he was too lax on regulating Wall Street and that Yellen, another candidate mentioned by Obama, was a better choice.
If selected by Obama and confirmed by the Senate, Yellen, 67, would become the first woman to serve as the Fed’s chairman.
“It would be very difficult now for Obama to back away” from Yellen, said David Zervos, a managing director at Jefferies & Co. in New York, who served as a visiting adviser to the Fed in 2009. If Obama chooses someone else, “then, it sort of turns very anti-Yellen from the Obama administration, which I don’t think he has been,” Zervos said yesterday on Bloomberg Television.
People familiar with the internal deliberations said that while White House officials don’t blame Yellen for Summers’s exit, there is resentment toward Yellen supporters who they say undermined Summers’s credentials.
The decision over who should take over when Ben S. Bernanke’s tenure as central bank chief expires on Jan. 31 coincides with Fed discussions over how quickly to wind down its $85 billion in monthly bond purchases.
Traders had speculated that, given Summers’s past questioning of the effectiveness of quantitative easing, he might have reduced the stimulus faster than other candidates.
With Summers out of contention, stocks rallied for a third day and Treasuries gained for a fifth.
The Standard & Poor’s 500 Index added 0.4% to 1,705.00 at 2:27 p.m. in New York after climbing 0.6% yesterday. The yield on 10-year Treasuries declined 1.4 basis point to 2.85%.
Yellen also has the support of investors and a core group of more than 400 economists who signed on to a letter supporting Yellen’s candidacy, including former Federal Reserve Vice Chairman Alan Blinder.