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Diana Farrell on Larry Summers’ legacy and successor

September 23, 2010, 1:05 AM UTC

Farrell, one of Larry Summers’ deputies at the NEC and a potential contender for his replacement, spoke to Fortune about what qualifications his successor should have.

Diana Farrell, deputy director of the National Economic Council

The news that Larry Summers, the strong-willed and frequently controversial captain of President Obama’s economic team, will quit the administration after the mid-term elections did not come as a major shock on Tuesday. Summers, the director of the National Economic Council, originally signed up to serve for only a year. And chatter about a shake-up in the senior ranks of the roster has gotten louder as the economic recovery has sputtered, weighing on Democrats’ already bleak political prospects.

The question now is who will replace him. A woman, to balance a team that’s top-heavy with men? Someone with private sector experience, to offer real-world perspective and to help improve relations with business leaders?

Diana Farrell, one of Summers’ two deputies at the NEC, is both, having served as the director of the McKinsey Global Institute until she joined the administration last year. As such, she’s already generating buzz as a potential successor to Summers. On Wednesday, we caught up with Farrell, who will participate in Fortune’s Most Powerful Women Summit early next month in Washington, DC.

What will Larry Summers’ legacy be?

I think his legacy and the President’s legacy are going to be extraordinary. Consider the first 18 months of this administration, when Larry was really a key architect of a lot of the economic policy, it was an unprecedented time in the number of things we were faced with. It’s easy for people to concentrate, as of course they will, on just how hard the economy continues to be. But for many of us who joined the administration at that time, as Larry and I did, who saw the precipice we were on, it’s hard to undermine the legacy of bringing something from the brink of a Great Depression, which is where we were, to a bad recession, which is where we are.

What will his exit mean to the economic team?

One of the things about Larry is that the power of his advice comes not from his position but from the power of his ideas, which he will continue to share with the [President’s Economic Recovery Advisory Board], and with the President when necessary. So in some senses, I don’t think there’ll be a big gaping hole because there will be some continuity. There has been a lot of discussion about Peter Orszag leaving, Christy Romer leaving, and now Larry leaving, but I would say if you look at most administrations, that sort of turn to a new stage is a natural thing. The programs that are in play will continue, and they’re now on very good footing.

Are you interested in replacing him?

First of all, the decision, of course, lies entirely with the President. And I would not even broach beyond that. But frankly from my personal point of view, I have been unbelievably busy. I come from a culture of hard work and long hours at McKinsey, but these last couple years have been extraordinary. I really haven’t given a lot of personal time to reflect on exactly what I am and what I’m not going to do next.

Three of the four top jobs on the economic team — Austan Goolsbee, at the Council of Economic Advisers, Jacob Lew at the Office of Management and Budget, and Tim Geithner at Treasury — are filled by men. How important is it for women to be represented on the team? Should a woman get this job?

I absolutely think women’s perspectives should be considered in making economic decisions. I push back on the view that the economic team is only the three or four people mentioned there. Take a look at the number of women who are involved in a lot of the economic decision-making, and have been for a while, and you will see it’s actually a very impressive list. I think the President has been a big supporter of women, not just on the Supreme Court, but everywhere else, and I think that will continue to be the case.

Has the White House team been missing a senior voice from the corporate world?

This is my first time serving in government — I came from the private sector — and I just think it is a fantastic thing for people to do, for people in the private sector to serve in government, to serve their country, and to really understand what a very large fraction of the economy and society is all about and how this works. And even though I would concede the point that you’re hard-pressed to find in the administration many examples of CEOs who have high-level posts – it’s just a fact – I would say that we’ve gone to great lengths to ensure that the business perspective is incorporated.

We may not always satisfy the business perspective, but it’s certainly there. Having said that, I think it’d be fantastic having more private sector people, particularly people who have run large companies and understand the management of large-scale organizations.

Would bringing a CEO in help repair the breach between the administration and business?

I can’t imagine that it wouldn’t help, but either way, I think there will be many other things done that will continue to help and we’ll constantly be thinking about improving relations with business where possible. I know [White House senior advisor] Valerie [Jarrett] has a pretty extensive business outreach program. And there’s a real commitment — especially in this next phase, as the private sector will play a much more active role in the recovery — to facilitate that role wherever we can.

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