A Fed chair pick is likely weeks away, not next week

Larry Summers
Andrew Harrer | Bloomberg | Getty Images

President Obama is still said to favor Larry Summers as the next chairman of the Federal Reserve but the pick may still be a couple weeks away. People close to the situation say no final call has been made and Obama could still choose Fed Vice Chair Janet Yellen or another candidate to succeed Ben Bernanke's whose term expires at the end of January.

Some media reports on Friday suggested the pick would come next week around the time the central bank's Open Markets Committee holds its next meeting on interest rates. But people close to the White House pushed back on those reports, saying a pick would likely not come next week. The situation remains highly fluid and could change at anytime. "The people who know are not talking and the people who don't really know are," said one person close to the Fed selection process.

(Read more: Making the case for Yellen)

ALSO IN WASHINGTON THIS WEEK—Obama managed to avoid a likely humbling defeat in Congress this week over a Syria use of force resolution as the administration embraced efforts led by the Russians to find a diplomatic solution. But all that means is Obama will now face off with Republicans over funding the government and raising the debt ceiling with extraordinarily unpredictable results.

Odds of a shutdown when the government runs out of money on Oct. 1 are growing as restive House Republicans keep shooting down every effort by their leadership to craft a solution that allows for a vote on defunding Obamacare (the Holy Grail of the right) while also passing a resolution to keep the lights on. The GOP leadership basically threw up its hands and left town on Thursday with no idea how it will craft a majority (that does not rely on mostly Democrats) to pass a government funding bill.

Nation's debt drama takes center stage

Meanwhile, the administration made it clear they will absolutely not budge on their refusal to accept any further delays in Obamacare implementation. It is slightly less clear the administration will stand firm on its pledge not to negotiate over raising the debt ceiling, which needs to happen by mid-October to avoid a disastrous U.S. default. In order to get a debt ceiling increase, Democrats are likely to have to offer Republicans something in terms of further spending cuts or entitlement reforms.

(Related video: Can Obamacare be funded?)

The important thing to watch for is how long Republicans continue to use Obamacare as the hostage in the fiscal debates. If they stick to that position down to the end, the odds of a shutdown or debt ceiling crisis spike because Obama cannot give in on his signature domestic achievement just as his poll numbers are sagging in the wake of the Syria debate and revelations of government surveillance.

An ugly fiscal fight would come at precarious time for the economy as data out on Friday showed consumer confidence sagging once again with retail sales soft, suggesting the economy may not be able to sustain another self-inflicted blow from Washington.

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— By Ben White, POLITICO's chief economic correspondent and a CNBC contributor. White also authors the daily tip sheet POLITICO Morning Money [politico.com/morningmoney] Follow him onTwitter @morningmoneyben.