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Republican Senator Isakson has concerns about Summers for Fed

Lawrence Summers, director of the White House National Economic Council, takes questions after delivering a speech on "Responding to an Hist
Lawrence Summers, director of the White House National Economic Council, takes questions after delivering a speech on "Responding to an Hist

By Rachelle Younglai

WASHINGTON (Reuters) - Republican Senator Johnny Isakson on Tuesday expressed concerns about the potential nomination of former Treasury Secretary Lawrence Summers to serve as the next chairman of the Federal Reserve, but stopped short of saying he would oppose him.

Isakson is the latest senator to express concerns about Summers in what has become an unusual public debate on the merits of Summers and Fed Vice Chair Janet Yellen to succeed Ben Bernanke as Fed chairman.

"He is a smart man, knows his economics and may end up being the choice we have to choose from," the Georgia senator told Reuters.

"But it is fair to say I have some concerns that would have to be answered. Would I rule it out entirely? No. But I have some reservations that would have to be dealt with and that would be between me and Mr. Summers."

Isakson would not provide detail on his concerns.

A number of senators - mostly Democrats - have criticized Summers for easing banking restrictions and not regulating derivatives when he was treasury secretary in the 1990s during Bill Clinton's presidency. Some believe that helped lay the foundation for the recent financial crisis.

Those senators also have taken issue with what they view as Summers' acerbic personality, as well as with comments he made while president of Harvard University suggesting that women had less natural aptitude for engineering and science than men. He has since said he regrets those comments.

Isakson, who has helped lead a small group of Republican senators to work with the White House on fiscal issues, said he did not have any reservations about Yellen because he was not familiar with her.

Isakson's concerns about Summers could signal the difficulties Obama might face in securing the Republican support he will likely need to get Summers confirmed by the Senate.

The Democrats have a 54-46 advantage in the Senate and 20 Democratic senators have sent Obama a letter urging him to choose Yellen to lead the Federal Reserve. Two of those include Sherrod Brown, who has said he would vote against a Summers nomination, and Jeff Merkley, who according to congressional aides, also will oppose him.

In addition to Brown and Merkley, other Senate Democrats are mulling ways to prevent Summers from becoming Fed chair, Senate aides said. The opposition from within Obama's own party will make it hard for Senate Majority Leader Harry Reid to rally his Democratic caucus around Summers if he is nominated.

"Summers will be a heavy lift in the Senate," said one senior Senate Democratic aide.

Bernanke's term expires at the end of January and the White House had said Obama would announce his pick for the Fed in the fall.

However, the timing is unclear after the Obama administration spent the past eight days trying to get Congress to approve a military strike against Syria only to reverse course on Tuesday in favor of a diplomatic solution.

The Federal Reserve has come under intense public scrutiny and stirred controversy as a result of its aggressive efforts to prop up the financial sector during the 2007-09 crisis and an unprecedented bond buying program aimed at stimulating faster economic growth.

Isakson said he was concerned with that bond buying program, known as quantitative easing, becoming a habit rather than a short-term strategy and said it was important for the Fed to be clear with the public about all of its actions.

"There is going to be a need for an open transparent communicator at the head of Federal Reserve. I think that may be the most important quality they need to have," Isakson said.

"As far as the American people are concerned, the Fed is a little bit of a mysterious organization," he said.

(Reporting by Rachelle Younglai; Editing by Bill Trott)

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