Mr. Summers, a key architect of the Obama administration’s economic stimulus plan in 2009, informed President Obama of his decision in a phone call Sunday morning. Mr. Obama said in a statement that he accepted the decision.
Mr. Obama said said he “will always be grateful to Larry for his tireless work and service on behalf of his country, and I look forward to continuing to seek his guidance and counsel in the future.”
“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 and made the kind of progress we are seeing today,” Mr. Obama said.
The move leaves Janet Yellen, vice chairwoman of the Fed, as the obvious front-runner to replace Chairman Ben S. Bernanke when his term expires in January. Mr. Summers was said to have been Mr. Obama’s leading candidate.
The White House didn’t give a reason for Mr. Summers‘ withdrawal, but the prospects for his nomination dimmed last week when a top Democrat on the Senate Committee on Banking, Housing and Urban Affairs, Sen. Jon Tester of Montana, announced that he wouldn’t support Mr. Summers. A spokeswoman for Mr. Tester said that the senator “believes we need a consensus-builder to lead the Federal Reserve” and that he was “concerned about Mr. Summers‘ history of helping to deregulate financial markets.”
Mr. Summers, a former White House economic adviser, recently reached out to another key Democrat on the committee, Sen. Elizabeth Warren of Massachussetts, as the debate intensified over his potential nomination.
Opposition from women’s groups also was damaging Mr. Summers‘ candidacy. He came under fire for a controversy in 2005, while he was president of Harvard University, by suggesting that women were not as capable as men in math and science.
As Mr. Tester suggested, Mr. Summers also sparked opposition over his support while secretary of the treasury under President Clinton for removing barriers that prevented financial institutions from consolidating their banking and investment subsidiaries.
Senators of both parties were opposed to his nomination, and many lawmakers wrote Mr. Obama a letter this summer urging him to appoint Ms. Yellen.
Other Democrats who were expected to join Mr. Tester in opposing Mr. Summers‘ nomination were Sens. Sherrod Brown of Ohio, Jeff Merkley of Oregon and Ms. Warren.
Their opposition could have left Mr. Obama in the position of needing Republican support just to get Mr. Summers‘ nomination out of the banking committee. Democrats hold 12 of 22 seats on the committee.
Ms. Yellen’s service in government includes a stint on Mr. Clinton’s Council of Economic Advisers in the late 1990s. From 2004 to 2011 she was president of the Federal Reserve Bank of San Francisco. She has served as Fed vice chair since 2010.
Another possible candidate for the job is Donald Kohn, who is retired from the Fed board.