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Syria could complicate Obama's decision on next Fed chairman

Former U.S. Treasury Secretary Lawrence H. "Larry" Summers speaks during a financial and economic event at the London School of Economics (L
Former U.S. Treasury Secretary Lawrence H. "Larry" Summers speaks during a financial and economic event at the London School of Economics (L

By Alister Bull

WASHINGTON (Reuters) - The uphill battle to convince the U.S. Congress to authorize a military strike against Syria could make it harder for President Barack Obama to nominate his former economic adviser Lawrence Summers as the next chairman of the Federal Reserve.

Summers, widely seen as Obama's first choice to replace Fed chief Ben Bernanke when his term ends in January, is publicly opposed by a number of liberal Democratic senators, who prefer Fed Vice Chair Janet Yellen for the job.

Obama may push ahead with Summers regardless.

But if the president spends scarce political capital to secure the support of liberals for a military strike on Syria, as appears likely, it may not leave enough to push Summers' nomination through the Senate.

"Summers would be my first choice, but it doesn't look like he can fight his way through," said Bill Frenzel, a former Republican lawmaker who is now with the Brookings Institution in Washington.

Obama faces a crucial test of his presidency in trying to win congressional backing for military strikes against Syria in response to an alleged chemical weapons attack on August 21 that the United States has blamed on President Bashar al-Assad.

A Reuters/IPSOS poll on Monday showed only 16 percent of Americans support military action and there is little appetite among the left wing of the president's own party for the United States to become involved in another conflict after a decade of wars in Iraq and Afghanistan.

"If I were advising the president, I would say: 'Your reputation is at stake. The United States' reputation is on the line. You have got to do everything you can to get the Syria approval from the Congress. If it means you are going to lose something later, too damn bad, because you need this right now,'" said Frenzel, who served in Congress for 20 years.

The White House did not respond to a request for comment.

The emergence of Summers, the former head of Obama's National Economic Council, as the Fed front runner has catalyzed vocal opposition among progressives. They criticize him for opposing regulation of derivatives in the 1990s, and for what some view as sexist comments he made about women's aptitude in math and science while he was president of Harvard University.

Twenty Democratic senators - more than a third of the party's caucus in the chamber - have signed a letter urging Obama to name Yellen, who could become the first woman to lead the U.S. central bank.

The AFL-CIO, the nation's largest federation of labor unions and an important Democratic Party ally, has also backed Yellen and is refusing to rule out working to defeat Summers if Obama nominates him.

POLITICAL CAPITAL

"The selection of the next Federal Reserve chairman is one battle that may become more difficult to wage," analysts at Bank of America/Merrilly Lynch wrote in a research note last week.

"We think there is a better chance now for Obama to stick with Janet Yellen, a candidate who has already been vetted by the Senate and who is not considered controversial or in need of a hard-fought confirmation," they said.

In addition to the Syria vote, Obama is facing a number of tough battles ahead. He must get agreements to raise the U.S. debt ceiling and continue funding the government, and forge a bipartisan consensus on immigration reform.

"Is this really where he needs to use up all his political capital? My answer is no, especially given that Janet Yellen is in the wings," said Jim Dean, chairman of Democracy for America, a progressive group opposed to Summers' nomination.

The president is expected to announce his Fed pick before the end of the month. It may have come sooner were it not for the pending votes in Congress on Syria.

Time is running short. Bernanke's term expires at the end of January and the Senate has only about 72 scheduled legislative days left this year, including Christmas week - when lawmakers would prefer to be home.

One former administration official was skeptical that the Syria issue would dissuade Obama from picking Summers if he decided the Harvard professor was the right choice. But the official acknowledged that the president already has a lot on his plate.

"I think probably the bigger deal for him is that there are just too many airplanes circling the runway here," said Jared Bernstein, a former adviser to Vice President Joe Biden.

"The agenda was already crowded and I can see where the White House wouldn't want to inject the Fed chair debate into this mix. So maybe they hold off until October," said Bernstein, who is now with the Center on Budget and Policy Priorities in Washington.

(Additional reporting by Amanda Becker in Los Angeles. Editing by Christopher Wilson)

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