Is Larry Summers a Casualty of Syria?

One of the more interesting things I was reading yesterday had to do with the topic of Chairman Bernanke’s successor.  Over the past two weeks, the market had largely become resigned to the fact that Larry Summers would become the next Fed chair, which was viewed as an incrementally “hawkish” event.  Acceptance of that fact is something that I think helped push Treasury yields to their recent highs.

But, I’m hearing a lot of chatter that, because President Obama has spent so much political capital on getting this Syria resolution passed (which incidentally may not even be voted on now) he may not have enough left to get Summers into the Fed chair. (Summers remains Obama’s #1 pick, but there is a lot of opposition in Congress.)

At a minimum, the announcement of a new Fed chairman, which prior to Syria many were penciling in for early to mid-September, will inevitably be delayed due to the Syria resolution.

Bottom line is the market “thought” it was Summers all along, but if Janet Yellen gets the nod, that will be a “dovish” event compared to current expectations, and I’d expect to see Treasurys rally off that news.