Yellen frontrunner for Fed chair after Summers withdraws

If confirmed, she would be the first woman to hold the job

Federal Reserve Vice Chair Janet Yellen became the frontrunner for the US central bank's top job when President Barack Obama's preferred candidate, former adviser Larry Summers, withdrew, sources familiar with the situation said on Monday.

If nominated and confirmed, Yellen would replace Federal Reserve Chairman Ben Bernanke, whose second term expires in January.

Summers, a former Treasury secretary under President Bill Clinton and a top economic adviser to Obama during the first two years of his presidency, dropped out of consideration for the post on Sunday because of opposition among fellow Democrats that would have made it difficult to be confirmed by the US Senate.

Yellen, who has a long career in the Fed system and chaired the White House Council for Economic Advisers under Clinton, would be the first woman to hold the job.

People familiar with the situation said Obama had largely whittled down his decision to two candidates, Summers and Yellen. With Summers out of the picture, Yellen moved to the top of the list. The president had mentioned former Vice Chairman Donald Kohn previously as also being under consideration. Adding further candidates to the list now was seen as unlikely.

An announcement is not expected this week. White House spokesman Jay Carney told reporters earlier on Monday that Obama would announce his decision in the fall.

"Calendar watchers will note that we are still in the summer," Carney said. The autumn officially begins on Sunday.

Analysts and former administration officials said Summers' withdrawal put Yellen in good position to be appointed.

"We believe current Federal Reserve Vice Chair Janet Yellen is now the clear frontrunner, followed by former Federal Reserve Vice Chair Donald Kohn, with only a slim chance of it being somebody else," economists at Nomura wrote in a note to clients.

"Donald Kohn is an experienced and respected central banker, but he has not worked at the Fed since 2010. Financial markets would likely not react as well to his nomination and they would to Yellen's."

Top contender

Summers' close relationship with Obama had given him the upper hand in the selection process. The former president of Harvard University helped lead Obama's economic team during the financial crisis that faced the White House when Obama took over in 2009.

White House officials have stressed for weeks that the president had not made a final decision, however, and Yellen remained a contender even as Summers appeared to be on track to get the nod.

Progressive and women's groups had argued in favor of Yellen. Choosing a man after Summers' withdrawal likely would be seen as a symbolic slap against those important constituent groups, which helped Obama win re-election in 2012.

"Easily, the front runner now is Vice Chair Janet Yellen," said Jim Kochan, chief fixed income strategist at Wells Fargo Funds Management LLC in Menomonee Falls, Wisconsin.

Summers' potential appointment created an unprecedented backlash and would have added to a list of battles the president faces with Congress this fall over the budget, raising the US debt ceiling, and reforming immigration laws.

"(Obama) hadn't made a decision, so I don't read this as some kind of mutiny," said one former administration official, referring to opposition among Obama's fellow Democrats to Summers. "But he has plenty of challenges on his plate, so maybe this spares him one."