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Summers' Stature Means Obama Faces Tough Task in Replacing Him

For all of Lawrence Summers’s drawbacks, a strong-willed and intellectual economist who critics say is difficult to work with, President Barack Obama faces a tough task in finding a replacement with the stature of the departing director of the National Economic Council.

Summers will return to Harvard University, where he has served as president and is a professor on a two-year leave, by the end of the year, the White House said yesterday. He will leave the economic team at a time when the nation is still recovering from the worst recession since the 1930s, and following elections in which the president’s party faces the possible loss of control of the House and perhaps the Senate.

Obama will be searching on three fronts, people familiar with the discussions say. Administration officials are debating recruiting a corporate executive to allay the business community’s doubts about White House policies. They’re also looking at female candidates to add balance on an economic team dominated by men. Most of all, the White House could use another Larry Summers.

Summers was the “brain trust for Obama,” said Catherine Mann, a former Federal Reserve economist who is now an economics professor at Brandeis University in Waltham, Massachusetts.

Answering the Call

“I will always be grateful that at a time of great peril for our country, a man of Larry’s brilliance, experience and judgment was willing to answer the call and lead our economic team,” Obama said in a statement yesterday.

White House officials said a decision on a replacement isn’t imminent because Summers will stay on until the end of the year.

“Fortunately, there is some time here,” Austan Goolsbee, head of the White House Council of Economic Advisers, said in an interview.

Among those whose names have been discussed is Anne Mulcahy, the former chief executive officer of Xerox Corp., two people familiar with administration discussions said. Other potential candidates include David Cote, CEO of Honeywell International Inc., and Richard Parsons, chairman of Citigroup Inc., according to one of the people.

Cote is a member of Obama’s commission on cutting the federal deficit and, along with Parsons and Mulcahy, has been among the executives the president has called to the White House for consultations.

Dinner With Jarrett

Mulcahy had dinner last week with senior Obama adviser Valerie Jarrett as part of the White House outreach to business, an administration official said on condition of anonymity. They didn’t discuss a White House position, the official said.

Erskine Bowles, the co-chairman of the deficit commission and a former Clinton administration official, has also been mentioned as a possibility, a third person said.

The administration official said there is no final list of candidates under consideration and that Summers will play a role in determining his successor. The position doesn’t require Senate confirmation.

Martin Neil Baily, who was chairman of the Council of Economic Advisers in President Bill Clinton’s administration, said Obama needs someone who can smooth the tensions between the White House and the corporate world.

Business Interests

“I think they are looking for someone who businesses can feel they can talk to and understands their interests,” Baily said. “That doesn’t mean Larry didn’t. But that’s going to be an important qualification for the job.”

Douglas Holtz-Eakin, who was the top economic adviser to Republican nominee John McCain during the 2008 presidential campaign, said the Obama White House has “a serious problem” in relations with U.S. businesses.

“They need an ambassador to that community, and a visible appointment that says they respect and care about business in the United States would be very important,” Holtz-Eakin said in an interview with Bloomberg Television.

White House advisers acknowledge it will be difficult, if not impossible, to find anyone who matches Summers’s knowledge of economics and public policy, people familiar with the selection say.

The announcement was made as the administration and Democrats are preparing for November’s congressional elections. Republicans are campaigning to regain control of Congress by arguing that Obama’s policies haven’t done enough to help pull the U.S. out of the recession.

Target for Republicans

Summers and Treasury Secretary Timothy Geithner have become targets of Republican leaders during the campaign. House Republican Leader John Boehner of Ohio said in an Aug. 24 speech that Obama should fire the two officials, along with the rest of the administration’s economic team.

Summers told Obama when he joined the administration that he would only commit to serve for one year, according to a White House official. Last year, Obama asked him to stay on to see through the passage of financial-overhaul legislation, the official said. He planned to return to Harvard in time for the spring semester.

The departure of Summers will leave Geithner as the only member of Obama’s original top-level economic team. Since the end of July, Peter Orszag, director of the Office of Management and Budget, and Christina Romer, head of the Council of Economic Advisers, have resigned.

Summers’s Career

Summers, 55, earned his doctorate in economics at Harvard in Cambridge, Massachusetts, and at 28 was granted tenure, the youngest age anyone had gained tenure at the time. He spent time on the staff of the White House Council of Economic Advisers in the 1980s before joining the World Bank as chief economist.

He was Clinton’s Treasury secretary from 1999 to 2001, after which he became president of Harvard. Summers quit that post in 2006 after a series of battles with the Faculty of Arts and Sciences, which teaches most of the undergraduate courses, and following a controversy over comments he made at a conference, in which he suggested women lacked an aptitude for science.

Within the Obama administration, Summers has been a forceful advocate of his positions and sometimes clashed with other advisers, people familiar with those matters said.

Obama may also seek someone who will serve more as a broker for alternative policies rather than an advocate, Mann said. “Larry’s a very strong person who has very strong opinions,” she said.

To contact the reporter on this story: Hans Nichols in Washington at hnichols2@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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