Politicslarry summers fedPoliticsJohnny Isakson

Johnny Isakson Has 'Some Reservations' About Potential Larry Summers Nomination

GOP Senator Has 'Some Reservations' About Summers
Reuters
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Director of the National Economic Council Lawrence Summers arrives for the tax cut extension bill to be signed President Obama during a ceremony at the Eisenhower Executive Office Building in the White House complex, Friday, Dec. 17, 2010, in Washington. Obama is expected to announce a replacement for Summers early in the new year, soon after he returns to Washington from his Hawaiian vacation. (AP Photo/J. Scott Applewhite)

By Rachelle Younglai

WASHINGTON, Sept 10 (Reuters) - Republican Senator Johnny Isakson on Tuesday expressed concerns about the potential nomination of former Treasury Secretary Lawrence Summers to serve as the next chairman of the Federal Reserve, but stopped short of saying he would oppose him.

Isakson is the latest senator to express concerns about Summers in what has become an unusual public debate on the merits of Summers and Fed Vice Chair Janet Yellen to succeed Ben Bernanke as Fed chairman.

"He is a smart man, knows his economics and may end up being the choice we have to choose from," the Georgia senator told Reuters.

"But it is fair to say I have some concerns that would have to be answered. Would I rule it out entirely? No. But I have some reservations that would have to be dealt with and that would be between me and Mr. Summers."

Isakson would not provide detail on his concerns.

A number of senators - mostly Democrats - have criticized Summers for easing banking restrictions and not regulating derivatives when he was treasury secretary in the 1990s during Bill Clinton's presidency. Some believe that helped lay the foundation for the recent financial crisis.

Those senators also have taken issue with what they view as Summers' acerbic personality, as well as with comments he made while president of Harvard University suggesting that women had less natural aptitude for engineering and science than men. He has since said he regrets those comments.

Isakson, who has helped lead a small group of Republican senators to work with the White House on fiscal issues, said he did not have any reservations about Yellen because he was not familiar with her.

Isakson's concerns about Summers could signal the difficulties Obama might face in securing the Republican support he will likely need to get Summers confirmed by the Senate.

The Democrats have a 54-46 advantage in the Senate and 20 Democratic senators have sent Obama a letter urging him to choose Yellen to lead the Federal Reserve. Two of those include Sherrod Brown, who has said he would vote against a Summers nomination, and Jeff Merkley, who according to congressional aides, also will oppose him.

In addition to Brown and Merkley, other Senate Democrats are mulling ways to prevent Summers from becoming Fed chair, Senate aides said. The opposition from within Obama's own party will make it hard for Senate Majority Leader Harry Reid to rally his Democratic caucus around Summers if he is nominated.

"Summers will be a heavy lift in the Senate," said one senior Senate Democratic aide.

Bernanke's term expires at the end of January and the White House had said Obama would announce his pick for the Fed in the fall.

However, the timing is unclear after the Obama administration spent the past eight days trying to get Congress to approve a military strike against Syria only to reverse course on Tuesday in favor of a diplomatic solution.

The Federal Reserve has come under intense public scrutiny and stirred controversy as a result of its aggressive efforts to prop up the financial sector during the 2007-09 crisis and an unprecedented bond buying program aimed at stimulating faster economic growth.

Isakson said he was concerned with that bond buying program, known as quantitative easing, becoming a habit rather than a short-term strategy and said it was important for the Fed to be clear with the public about all of its actions.

"There is going to be a need for an open transparent communicator at the head of Federal Reserve. I think that may be the most important quality they need to have," Isakson said.

"As far as the American people are concerned, the Fed is a little bit of a mysterious organization," he said.

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Before You Go

Economic Predictions That Were Blatantly Wrong (Or Have Blatantly Yet To Come True)
Paul Ryan: QE2 Risks Inflation(01 of12)
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Back in 2010, Republican Vice Presidential candidate Paul Ryan explained that the Federal Reserves plan to purchase $600 billion worth of securities -- known as QE2 -- was little more than "sugar-high economics" that risked rising inflation and weakening the dollar. But instead the opposite took place. According to Bloomberg:
"Since that prediction by Ryan, who has been chosen by presumptive Republican presidential nominee Mitt Romney to be his running mate, the dollar has risen against major currencies and inflation has stayed below the Fed's goal of 2 percent."
 (credit:AP)
Christina Romer: Unemployment Will Remain Below 8%(02 of12)
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In early January of 2009, Christina Romer, economic adviser to then President-elect Barack Obama, made a prediction: massive government stimulus on the order that would eventually be passed by Congress would keep unemployment below 8 percent, reports The Washington Post. Without it, unemployment could reach as high as 9 percent.In July 2012, unemployment edged up to 8.3 percent. It has not gone below 8 percent since January 2009. (credit:AP)
Jim Cramer: Obamacare Will Topple The Stock Market(03 of12)
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On March 18, 2010, Jim Kramer stated on Larry Kudlow's program that Obamacare would tank the stock market. The reform package was, in his words, "the single greatest impediment to the stock market going higher."On March 23 of that year, according to CBS News, President Obama signed health care reform into law. Following Yahoo's tracking of the Dow Jones, the market on April 1 2010 was at 10,927. On August 17, over two years later, the Dow Jones Industrial Average was pegged at 13,264. Granted, the market could still take a nose dive. But odds are it won't be because of health care reform. (credit:AP)
Michelle Bachmann: Obama Taking 'The Final Leap To Socialism'(04 of12)
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In a radio interview Minnesota Congresswoman Michelle Bachmann gave with Bill Bennet in March of 2009, the Minnesotan claimed that Obama's policies were representing the "final leap into socialism," Think Progress reported.But alas, while Bachmann's sensational claim may have gotten her into the spotlight, the government has been engaged in selling its stake in the industries that it had to temporarily prop up.General Motors, an automaker that the U.S. government had to prop up with emergency capital, bought back all preferred shares held by the U.S. Treasury as of December 2010, reports The New York Times.Wall Street's largest banks that have frequently brought about wrath from liberals such as Paul Krugman, like Citi, Goldman Sachs and JP Morgan, are still privately run. (credit:AP)
Glenn Beck: U.S. Will Go Through 'Great Depression Times 100' (Or Hyperinflation)(05 of12)
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In early 2010, then-Fox News commentator Glenn Beck said that the U.S. was likely in for a "Great Depression Times 100," reports Media Matters, going on to say that the country would experience a period of hyperinflation.Unemployment during the Great Depression peaked at around 25 percent, according to an article published by the Bureau of Labor Statistics. But even at the worst moments of the Great Recession, unemployment only reached slightly above 10 percent. Presently, it is at 8.3 percent, according to the Bureau of Labor Statistics. With inflation estimated to remain stagnant at 1.5 percent through 2012, the nightmare warnings of hyperinflation expounded by Beck as well as by renowned "economist" Peter Schiff appears to be just that. A nightmare. (credit:AP)
Rick Santelli: 'Stagflation Is Almost A Certainty'(06 of12)
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In October of 2009, CNBC analyst and Tea Party founder Rick Santelli told said on the show Fast Money that he believed "stagflation is almost a certainty." In other words Santelli was predicting that America would go through a period of high inflation and high unemployment. The only question he had was when.In November of that year, the Bureau of Labor Statistics revealed that between October 2008 and October 2009, prices rose by 1.7 percent not including food and gas. This made, at the time, Santelli's claim even bolder. Even though unemployment is still high -- almost three years later -- inflation has risen far below the Federal Reserves 2 percent annual target, Bloomberg reports. (credit:Getty Images)
Rush Limbaugh: Obamacare Will Leave 250 Million People Uninsured(07 of12)
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Among the many predictions conservative radio host Rush Limbaugh has made over the years, the one he made on March 8, 2010 was not one of his best.On his daily radio show The Rush Limbaugh Show, Limbaugh announced to his listeners that healthcare reform, which would be signed into law later that month, would end up leaving 250 million Americans uninsured, Media Matters reported.As of June 2012, 49.9 million Americans do not have health insurance, CNN estimated. (credit:AP)
Mitt Romney: U.S. WIll Default If We Raise Debt Ceiling(08 of12)
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In the June 13, 2011 Republican Presidential Debate, Mitt Romney, when asked about the consequences of not raising the debt limit answered the moderator's question with a question. "Well, what happens if we continue to spend time and time again, year and year again more money than we take in?"As Asher Smith pointed out on The Huffington Post, this can only mean that the U.S. will eventually be unable to pay off its obligations and, as a result, default.Bit as of August 2012, close to one year after the debt ceiling was raised, the U.S. still hasn't defaulted. (credit:AP)
Bill Gross: End Of QE2 Would Cause Bond Yields To Go 'Much Higher'(09 of12)
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In March of 2011, PIMCO Co-Founder Bill Gross predicted an imminent spike in treasury bond yields following the end of the Federal Reserve's Quantitative Easing program, Fortune's Colin Barr reported.Bond yields, Gross told reporters, were likely to go "higher maybe even much higher" at the end of June 2011 when QE2 ended. The 10-year treasury bond yield has since fallen. Since the 2011, 10-year bond rates have hovered between 2.5 and 1.5 percent, according to Bloomberg.
Joe Biden: US Out Of Recession In 18 Months (Feb. '09)(10 of12)
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In February of 2009, Vice President Joe Biden predicted that the federal stimulus package being implemented by Barack Obama's administration would "literally drop kick us out of this recession," The Hill reported. "This [stimulus] is about getting this out and spent in 18 months to create 3.5 million jobs."Technically, the recession ended during the third fiscal quarter of 2009, according to the Bureau of Economic Analysis. But with unemployment hovering around over 8 percent for the last three years, some economists are no longer talking about calling the current economic period a recovery. Brad DeLong, an economist with UC Berkley, told readers on his blog in 2011 that we're now in the midst of a "Little Depression" instead.
Peter Schiff: Inflation At 20 Percent By 2009(11 of12)
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Economist Peter Schiff stated that the Federal Reserves monetary policies would lead to 20 percent inflation within one year. The statement, made in October 2008 on Glenn Beck's former CNN program, was proven wrong. During 2009, the U.S. actually experience deflation. (credit:AP)
Ron Paul: Beware Of Runaway Inflation(12 of12)
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Congressman Ron Paul believed that runaway inflation was "just horrendous" in May 2011, he said during an appearance on Fox Business News. When Congressman Paul made that statement, inflation was pegged at 3.2 percent and, after peaking at 3.9 percent that October, inflation has steadily fallen to 1.4 percent in July 2012. (credit:AP)
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