How the Syria Vote Affects the Future of the Federal Reserve

Last week, when it first became clear that the White House was going to twist arms in an attempt to win congressional approval to attack Syria, I noted that presumptive-Fed-nominee-in-waiting Larry Summers must have been less than thrilled by the news. Why? Because Democrats who have just been pressured to take a tough vote on Syria will be less amenable to another such pressure campaign immediately afterward (which is when the White House will turn to the matter of replacing current Chairman Ben Bernanke). Given Summers’s unpopularity relative to other potential Fed choices, that has to factor into Obama’s decision—and if it doesn’t, it will certainly factor into the decisions of the senators who will decide Summers’s fate.

Since then, it’s become clear just how formidable a task winning a Syria vote will be. So whether or not he ekes out a win, Obama will have to contend with many unhappy senators, Democrat and Republican. As former Representative Tom Davis (R-Va.) told my colleague Al Hunt in this Bloomberg View column, “If a Republican gives the president a vote on this, they’ll have to go back to the base on the fiscal stuff and maybe the Fed.” Translation: Republican votes for Summers will be even harder to round up.

But the real problem will be with Democrats. If Obama insists on nominating Summers, he won’t be able to argue that the vote presents Democratic senators with the kind of binary choice they face on Syria, where one outcome will lead to a strike and the other will result in no strike. As White House officials themselves have pointed out in the context of defending Summers, the top two contenders for the Fed chairmanship, Summers and Janet Yellen, have practically the same policy profiles—which means that Democratic senators can vote down Summers and still be assured of winding up with a chairman (or chairwoman) who shares his general outlook on monetary policy.

What’s more, the argument that Obama’s credibility rests on the outcome of the vote—an argument White House partisans are right now marshaling on behalf of their bomb-Syria push—won’t hold any water when it comes to the Fed, since Obama will have chosen this fight by nominating Summers, rather than having had it forced on him by a murderous dictator.

Before it's here, it's on the Bloomberg Terminal.