Fed contender Larry Summers cancels Citigroup events

Larry Summers
Jim Davis | Boston Globe | Getty Images

Former U.S. Treasury Secretary Lawrence Summers has pulled out of speaking engagements and other events involving Citigroup while President Barack Obama considers whether to nominate the Harvard economist as the next chairman of the Federal Reserve, the bank said in a statement.

"Mr. Summers has withdrawn from participation in all Citi events while he is under consideration to be Chairman of the Federal Reserve," Danielle Romero-Apsilos, a spokeswoman for the third-biggest U.S. lender, said in a statement e-mailed to Reuters on Saturday.

Summers, a former economic adviser to Obama, has bowed out of a keynote address on global economic challenges at a Citigroup research seminar next month, according to a Bloomberg report.

While Summers is widely thought to be Obama's preferred choice to replace Fed Chairman Ben Bernanke when his term is up in January, an unusually vitriolic public debate has erupted over that possibility in recent months.

The White House said on Friday that the president had not yet made up his mind on who should lead the U.S. central bank — a decision that traditionally has generated little interest beyond Wall Street and academia.

But since Summers emerged as a lead contender for the job this summer, his history as a consultant to large financial institutions including Citigroup has fueled debate among critics and lawmakers about his suitability for the top Fed job.

Summers has been praised as a brilliant economist and a shrewd policymaker. But his work with financial firms has critics maintaining that his relationship with Wall Street is too cozy to maintain the Fed's vaunted independence.

The central bank plays a key role in guiding the world's largest economy and has taken on new oversight responsibilities following the worst U.S. financial crisis since the Great Depression.

Summers, who has also been paid to write a column for Reuters, was a key economic adviser to Obama in his 2008 campaign as well as during his first term. After heading the White House National Economic Council, he left the administration in 2010 to pursue a career in the private sector.

Some Democrats are not happy with Summers, who served as Treasury secretary under President Bill Clinton, because he backed banking deregulation in the 1990s, which they believe sowed the seeds for the 2007-2009 financial crisis.

The financial crisis led to a massive taxpayer bailout of Wall Street that continues to anger many ordinary Americans and could become another issue for Summers.

Four Democrats on the Senate Banking Committee are now expected to vote "No" if Obama nominates Summers as the next chair of the Federal Reserve, further complicating one of the most vital decisions of his second term.

Fed Vice Chair Janet Yellen is also a candidate for the job.

A letter urging her nomination has been signed by 20 Senate Democrats. If nominated and confirmed, Yellen would be the first-ever woman to lead the U.S. central bank.