“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 recovery,” Mr Summers wrote in a letter yesterday to President Barack Obama.
Mr Obama said he accepted Mr Summers’s decision and praised his former economic adviser.
“Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom and leadership that we wrestled the economy back to growth,” Mr Obama said, adding that he would “always be grateful to Larry.”
Mr Summers, 58, was one of three names Mr Obama had mentioned as possible replacements for Ben Bernanke, whose term as Fed chairman ends on Jan 31. Janet Yellen, 66, the current Fed vice chairman, was also on the candidate list along with Donald Kohn, 70, a former Fed vice chairman.
Mr Summers had reportedly been Mr Obama’s favourite. The Syria debate worked to his disadvantage, giving those opposed to his nomination time to keep pressure on the administration.
If nominated and confirmed, Ms Yellen would be the first woman to be chairman of the Fed.
Montana Senator Jon Tester, a member of the Banking Committee, last week became the third Democrat to declare opposition to a Summers nomination, along with the one independent.
Senator Sherrod Brown, an Ohio Democrat who circulated the letter and is a member of the committee, said at the time that the letter wasn’t about Mr Summers, “even though there is obviously a lot of opposition here to Summers.”
Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ in New York, predicted a continuation of Mr Bernanke’s policies should Ms Yellen succeed him.
“It tells you there will be no change in the leadership of the Fed and that the direction that it has taken under Bernanke is going to continue because his No 2 is taking over,” Mr Rupkey said. “If anything she is more pro-growth than Bernanke himself.”
“Summers was seen as the first choice, then Yellen, and everyone else is well down on the list.”
The potential nomination of Mr Summers was a hot-button issue for liberal groups in the US for much of the past few months, most of whom raised concerns about Mr Summers’ support of deregulatory measures for the banking industry during his time in former president Bill Clinton’s administration.
The magnitude of that opposition increased last week, as the three Democrats — all on the Senate Banking Committee — declared their intention to oppose his nomination.