By Ann Saphir
SAN FRANCISCO (Reuters) - Federal Reserve Vice Chair Janet Yellen surged to the top of the betting boards as the most likely pick to succeed Ben Bernanke as chairman of the Fed on Monday after former U.S. Treasury Secretary Lawrence Summers withdrew from the race.
A day after Summers bowed out, Irish bookmaker Paddy Power was offering odds of 1/7 for Yellen. That translates to a view that Yellen has about a 78 percent chance of being named the next Fed chair, a spokesman for the firm said.
Betting at the popular online bookmaker had favored Summers since early August, when U.S. President Barack Obama was reported to be leaning toward picking his former economic adviser.
Summers, it was said, had proved himself in a crisis and was considered by markets as a steady hand. Critics, though, saw him as too soft on banks, too tentative on fiscal stimulus, and potentially suspect due to his work as a consultant to large financial institutions he would oversee as Fed chairman.
On Sunday, in the face of rising opposition to his potential nomination from inside Obama's Democratic Party, Summers called the president to withdraw his name from consideration for the post.
About half of the total 8000 pounds ($12,700) staked in the Fed chair candidate market was on Summers, a Paddy Power spokesman said. Since Summers withdrew, almost all the betting had been on Yellen.
Donald Kohn, who was Fed vice chairman before Yellen and whom Obama has also mentioned as a possible contender, was priced at 4/1 against -- or giving Kohn about a 16 percent chance at landing the top spot at the U.S. central bank.
While those are steep odds, they are better than those offered on Roger Ferguson, 61, the chief executive of retirement fund manager TIAA-CREF who served as Fed vice chairman for seven years under Alan Greenspan. At No. 3, he is priced at 12/1.
Bernanke's term ends in January next year and his successor will have to contend with a still-fragile economy while likely also overseeing an end to the Fed's massive bond-buying stimulus program.
By 2015, if all goes as the Fed now forecasts, the central bank could start raising short-term interest rates in the world's largest economy. Rates have been held near zero since December 2008.
The Fed opens a two-day meeting on Tuesday to consider its next policy steps, which economists believe will include trimming its $85 billion-a-month bond-buying stimulus.
An aggressive advocate of the Fed's super-easy monetary policy, Yellen was the clear favorite earlier in the year to take over from her boss, with odds offered at 1/5 on June 30.
In Yellen, currently the Fed's No. 2 policymaker, Obama can count on policy continuity. He would also be the first president to put a woman at the head of the U.S. central bank.
A crackdown by regulators has put a damper on U.S. domestic betting on the outcome.
Intrade.com, another online betting parlor that catered to U.S. bettors and typically offered contracts on the outcome of races such as that for the top Fed job, shut down in July due to financial irregularities. ($1 = 0.6275 British pounds)
(Reporting by Ann Saphir; Editing by Dan Grebler and Krista Hughes)