WASHINGTON — Lawrence H. Summers, one of President Obama’s most trusted economic advisers during his first term, on Sunday withdrew his name from consideration as the next chairman of the Federal Reserve, bowing to criticism from Democratic senators who vowed to fight his nomination.
Summers, a former Harvard University president, a treasury secretary in the Clinton administration, and a former director of the National Economic Council under Obama, had been considered a front-runner for the job for months. But as rumors of his potential appointment grew stronger, opposition — centered on Summers’ sometimes brusque demeanor and his role in deregulating markets — intensified.
Senator Elizabeth Warren, a Massachusetts Democrat and a one-time colleague of Summers at Harvard, had signed a letter supporting another prominent candidate, Janet Yellen, vice chairwoman of the Fed , and was, according to a person familiar with her thinking, one of several influential members of the Senate Banking Committee who were likely to oppose him, though she remained officially neutral. The Wall Street Journal reported Saturday that at least three other members of the Senate Banking Committee would oppose Summers, meaning he would need Republican support to advance his nomination to the full Senate.
Summers alluded to the potential fight in his letter to Obama on Sunday.
‘‘I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interests of the Federal Reserve, the administration, or, ultimately, the interests of the nation’s ongoing economic recovery,’’ he wrote.
Late on Sunday afternoon, Obama said he had spoken with Summers and had accepted his decision to withdraw.
“Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression,” Obama said in a written statement. “And it was in no small part because of his expertise, wisdom, and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today.”
Obama had mounted a vociferous defense of Summers only weeks ago as the opposition had begun to build. The arc of Summers’s withdrawal closely mirrors another recent nominating fight. Susan Rice, who was the US ambassador to the United Nations, was considered a leading candidate for secretary of state late last year, before bowing out in favor of John F. Kerry amid Senate opposition. She now serves as Obama’s national security adviser.
The strong public interest in the appointment process to replace chairman Ben Bernanke is a recognition that the once obscure job has grown increasingly visible and influential in recent decades, in part because elected leaders have been at loggerheads over how to steer the economy. The chairman of the Fed, the face of the board that sets interest rates, is appointed by the president but acts independently. The chairman’s utterances are often the basis for wide shifts in the stock market.
Bernanke has also overseen the Fed’s much-discussed program of buying bonds in a bid to stimulate the economy by holding down borrowing costs.
On Monday, Obama will mark the fifth anniversary of the financial crisis, often traced to the collapse of Lehman Brothers, with a ceremony in the Rose Garden. The event will return Washington’s focus to the still-fragile economy following weeks of debate over the crisis in Syria.
Warren’s political career has also been closely tied to the lessons of the crash. She and Summers share a long history that includes disputes over financial policy. Summers, when he was Clinton’s treasury secretary, worked to repeal the Glass-Steagall Act, dismantling the wall between commercial banks and many investment activities. Warren and others contend that the repeal contributed to the 2008 financial collapse by creating institutions deemed “too big to fail” that required a government bailout to keep them solvent. As a result, they view Summers as too cozy with the banking industry.
Warren’s supporters also blamed Summers for scuttling her efforts to become head of the Consumer Financial Protection Bureau, which was her brainchild.
“Larry is a brilliant economist,” Warren said through a spokesman. “He has made many significant contributions in the past, and I have no doubt that he will continue to do so.’’
Summers, who currently is a professor at the Harvard Kennedy School of Government, has been criticized for his personal management style. Some have seized on his comments when, as Harvard president, he created a firestorm by suggesting gender differences contributed to women’s lack of representation in math and science fields.
But Summers’ defenders, including Obama, view him as integral to the economic boom that occurred in the 1990s and credit him with helping the nation emerge from the recent economic crisis.
Summers’s withdrawal is “a double tragedy,” said Jeffrey Frankel, a professor of capital formation and growth at the Harvard Kennedy School. “First, because we’re losing the services of Larry Summers, and second, it’s a symptom of the deteriorating situation in a confirmation process that has become so difficult as to be nonfunctioning.”
Summers played a key role in Clinton administration polices during the expansion in the 1990s, particularly the response to a series of international financial crises. With then Fed chairman Alan Greenspan and Robert Rubin, President Clinton’s second treasury secretary, Summers was part of what Time magazine called, “The Committee to Save the World.”
Summers was a champion of financial deregulation and opposed tougher rules for complex financial instruments known as derivatives.
Summers was an adviser to the Obama campaign in 2008 and Obama’s top economic adviser during the worst of the last recession. He played an instrumental role in crafting the nearly $800 billion stimulus package and other responses.
Most economists say the stimulus package stabilized the economy, ending the free fall. But the economic recovery has been lackluster, and more than four years after the recession officially ended, the nation still has nearly 2 million fewer jobs than when the downturn began at the end of 2007.
Liberal groups rejoiced after Summers’s withdrawal was announced.
“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,” said Adam Green, cofounder of the Progressive Change Campaign Committee, which has also been a major Warren backer. “He would have been an awful Fed chair.”
Bernanke will finish his term Jan. 31 but it will take time for a nominee to be confirmed by the Senate. In addition to Yellen, Obama has suggested he may choose Donald Kohn, a former Fed vice chairman. Obama’s office would not say whether Summers’ decision would pave the way for Yellen or another candidate.
Senator Edward J. Markey’s spokeswoman, Giselle Barry, said the Massachusetts Democrat believed each of the known candidates is competent.
Correction: Because of an editing error, an earlier version of this story misidentified Robert Rubin and misstated when he served as Treasury secretary. He was President Clinton’s second treasury secretary, from January 1995 to July 1999.