Opposition to Summers taking over the Fed came from liberal Democrats, a sign that the relationship between the president and his party is strained.
Two current Senate aides said the White House didn’t do Summers any favors by floating his name in the press before discussing the matter directly with most senators or their aides. But both stressed that on the major fiscal fights, the party is committed to standing together now that Summers is off the table.
One senior GOP financial industry lobbyist called the backlash against Summers from Obama’s fellow Democrats “precedent setting” that should serve as a wake-up call to Senate Majority Leader Harry Reid and Banking Chairman Tim Johnson of South Dakota.
“This was not just people not liking Larry, but people openly strategizing to kill it,” said this industry lobbyist. “There needs to be some big-hug moment because the president is going to need his entire party on one song sheet for the government shutdown and debt ceiling. These are not small little things; these are giant humongous things.”
Jim Manley, a former aide to Reid who is now with QGA Public Affairs, said the Summers battle showed the White House needed to “do a better job of trying to read the mood on the Hill.”
“This thing was in trouble a long time ago,” Manley added. “It was an unnecessary proposal that should’ve died a quick and painful death a long time ago.”
Still, Manley said, when it comes to the upcoming fiscal fights, Democrats will stand together.
“I’m confident that when it comes to the fiscal and budget issues facing the Hill in the fall, the president and House and Senate Democrats are going be on the same page, if only because what the Republicans are proposing is so off the wall, no one’s going to break from the president.”
Yet some Democrats and progressive advocates have already criticized Obama for such proposals as one that would switch Social Security cost-of-living increases to a stingier method called the chained consumer price index.
Democrats, too, have said they will oppose GOP spending bills that would avoid a government shutdown by keeping in place current budget levels including the sequester cuts. House Democratic Whip Steny H. Hoyer of Maryland said last week he could not support any bills that keep the sequester cuts in place.
It’s not clear whether the president’s eventual nominee to replace Bernanke, who is presumed to be retiring, will take into account the larger fiscal debate.
Some argue that the president, not wishing to look weakened by his own party, will pass over Yellen in favor of another candidate such as former Fed vice chairmen Donald Kohn or Roger Ferguson. Others, however, say not going with Yellen would just further fracture relations with Democrats.
“It would be wholly irresponsible for him not to pick Yellen now,” said one activist who has been working on the anti-Summers, pro-Yellen effort.
This source said Democrats need to figure out a unified strategy if they are to successfully negotiate with Republicans.
“You hash this stuff within your family,” the activist said.