WASHINGTON -- Influential Sen. Chuck Schumer (D-N.Y.), a member of the Senate Banking Committee, threw his weight behind Janet Yellen on Wednesday, saying she was his pick to head the Federal Reserve.
Yellen, the Fed's current vice chair, is the top choice of many on the left. Deep opposition to President Barack Obama's presumed first choice, former White House Economic Adviser Larry Summers, forced Summers to pull his name from consideration last week.
"Now that Summers has pulled out, I think the president should choose Yellen," Schumer told reporters on Capitol Hill. "She's an excellent choice."
Many Democrats, as well as populist and women's groups, opposed Summers because he was seen as one of the lead architects of deregulation and someone with a cozy relationship to the financial industry. But Schumer said the big banks like Yellen even better.
"One of the great ironies is Summers was tagged with being the Wall Street guy, but actually many people on Wall Street have preferred Yellen, not because of any views on deregulation, but because she's been so good at predicting where the markets would go," Schumer said.
Bankers and traders are enthusiastic about Yellen's dovish monetary policy inclinations, which include a commitment to bolstering employment by providing Wall Street with cheap government loans and pushing more money into the economy by purchasing bonds from banks. Stock prices rose after Summers announced he would withdraw from consideration for the top slot at the Fed, which many interpreted as the Street's endorsement of Yellen.
When Yellen and Summers served in the Clinton administration, both championed major deregulatory initiatives. Most notably, Yellen urged the repeal of the Glass-Steagall separation between traditional banking and riskier securities trading, and signaled an openness to allowing banks to link up with other commercial and industrial firms. The repeal of Glass-Steagall has been widely criticized for allowing mega-mergers between banks, insurance companies and securities houses, fueling the too-big-to-fail phenomenon.
But progressive supporters of Yellen tend to focus on her tenure as President of the San Francisco Federal Reserve during the housing bubble and financial crisis, when Yellen accurately identified the bubble and called for stronger regulation to limit its negative consequences on the economy. Yellen gave a series of speeches in 2008 criticizing predatory mortgage lending and calling to restructure the financial system.
Dozens of Senate Democrats signed a letter in August endorsing Yellen's candidacy. She has received strong behind-the-scenes support from Sens. Elizabeth Warren (D-Mass.), Sherrod Brown (D-Ohio) and Jeff Merkley (D-Ore.), three key members of the Senate Banking Committee.
Summers dropped out of the race for Fed Chair after it became clear he would have a difficult time getting voted out of committee. His role in the repeal of Glass-Steagall and the deregulation of derivatives during the Clinton years were heavily criticized, as were his strained relationships with women policymakers.