Lawrence Summers, a former top economic aide to President Barack Obama and a Treasury secretary under President Bill Clinton, has withdrawn from consideration to succeed Ben Bernanke as Federal Reserve chairman.
"I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the administration or, ultimately, the interests of the nation's ongoing economic recovery," Summers said in a letter to Obama.
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The news was first reported by the Wall Street Journal.
DAN FUSS, VICE CHAIRMAN AND PORTFOLIO MANAGER, LOOMIS SAYLES, BOSTON:
"This is a good move by Larry. This is a short-term plus for the bond market."
Treasuries will rally on this news as investors saw Summers as hawkish toward quantitative easing.
LARRY JEDDELOH, FOUNDER AND CHIEF INVESTMENT OFFICER, TIS GROUP, NORTH OAKS, MINNESOTA:
The 10-year Treasury note had partially priced a Summers chairmanship.
"If it's almost anybody but Larry, I think bonds will rally."
Jeddeloh said he would not surprised to see the 10-year Treasury rally back to the 2.3 percent-2.4 percent range.
ERIC STEIN, PORTFOLIO MANAGER, EATON VANCE, BOSTON:
"I do think there will be less for investors to worry about as there will be more policy continuity at the Fed."
The knee jerk reaction will likely be good for USTs, bad for the US dollar, and good for equities, Stein said.
"I think this development is generally a good one because while Summers has a brilliant mind and is a very talented economist, I think his style would have made life at the Fed very challenging for his colleagues.
"Bernanke has made a lot of progress in depersonalizing the institution and making it less dependent on the Chairman, and under Summers this depersonalization probably would have reversed a lot."
ADAM GREEN, CO-FOUNDER, PROGRESSIVE CHANGE CAMPAIGN COMMITTEE, WASHINGTON:
"Larry Summers' past decisions to deregulate Wall Street and do the bidding of corporate America has made the lives of millions of Americans more acrimonious. He would have been an awful Fed Chair. President Obama should appoint someone to lead the Fed who has not accepted millions in payments from Wall Street, and who will prioritize an economy that works for the little guy above further enrichment for the big guy."
Dollar: Falls in response in early Asia/Pacific trading
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(Americas Economics and Markets Desk; +1-646 223-6300)