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In the past week, Sens. Jon Tester, D-Mont., and Sherrod Brown, D-Ohio, on the Senate banking committee, which would have had to endorse Summers, announced that they would vote against him. Another committee Democrat, Sen. Jeff Merkely, Ore., had said long ago he would oppose Summers, and it was widely assumed that Sen. Elizabeth Warren, D-Mass., would have joined them as well.
That would have meant that Obama would have had to court Republicans to get Summers confirmed - a difficult task at the same time he would be trying to strip away Republican support for a deal to keep the government open and raise the federal borrowing limits.
"The truth is that it was unlikely he would have been confirmed by the Senate," said liberal Vermont Sen. Bernard Sanders, I, who said he would have voted against Summers if he was approved by the Senate banking committee.
Obama is now short on time to make a nomination, given that the Senate often takes a few months for confirmation. While some speculated Sunday that Obama might turn to Geithner, a person close to the former Treasury secretary said he does not want to be considered.
The decision may give a lift to markets, which were concerned about the uncertainty surrounding the Fed nomination process and the perception that Summers would have been less supportive of the Fed’s efforts to reduce unemployment.
"This news should be positive for the markets," said Millan Mulraine, director of U.S. rates research at TD Securities. "We could see a rally."
Summers’s friends expressed regret that the perception of him had been more caricature than reality, arguing that he would have pushed the Fed strongly to reduce unemployment and to demand more transparency in the financial system.
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