Investors reacted favorably to Lawrence Summers' decision to not serve as the next chairperson of the U.S. Federal Reserve and the potential for more monetary stimulus.
The S&P 500 finished at a near record high today, investors flocked to 10-year Treasury bonds, the dollar gained value, and Dow Jones industrial average rose slightly. The Nasdaq exchange fell on news of a sell off of Apple stock, CNN Money reports. The implication is that Summers was not the top pick for many investors.
Summers withdrew following opposition from key Democratic senators on the powerful Banking Committee including Sherrod Brown, Jeff Merkley, Jon Tester and Elizabeth Warren. While he has enjoyed President Obama's support, Summers is a polarizing figure due to his tepid support for fiscal stimulus in 2008, intimate involvement in banking deregulation and some past controversial remarks on women in science when was serving as president of Harvard.
A letter from Summers to President Obama expressed Summers' desire to avoid a contentious nomination. All signs pointed to a prolonged nomination fight. Even 56% of economists surveyed by USA TODAY stood in opposition and an anonymous former administration official said that Summers, "really does need to be stopped." Many others from the administration were working to boost Summers as well.
Senator Barry Sanders gave a harsh critique: "What the American people want now is a Fed chairman prepared to stand up to the greed, recklessness and illegal behavior on Wall Street, " he said. "...Not a Wall Street insider whose deregulation efforts helped pave the way for a horrendous financial crisis and the worst economic downturn in the country since the Great Depression. The Fed now must help develop policies which create millions of decent-paying jobs and rebuild the middle class."
Federal Reserve Vice Chair Janet Yellen is thought to be the leading candidate to run the Fed now. She is thought to be extremely qualified, predicted the 2008 recession, is focused more on unemployment than containing inflation, and is favored by Wall Street, according to a recent CNBC poll of "economists, traders, and strategists."
(image credit: Wikipedia, Opensecrets.org)