By Freddie Mooche

(AXcess News) Washington - A battle is brewing on Capitol Hill over control of the Federal Reserve after President Obama moved to nominate Janet Yellen to replace Fed Vice Chairman Donald Kohn who is stepping down in June.  If approved, Obama would have an easier path in controlling monetary policy, which worries many lawmakers.

Yellen, who has served as President of Federal Reserve Bank of San Francisco since 2004, is considered to be soft on monetary policy yet is one of the biggest supporters of Fed Chairman Ben Bernanke.  Yellen, with deep roots in the Democratic Party, also served as a top advisor to President Clinton.

Besides Kohn's exit from the Fed, Obama has a chance to fill two other seats.  The President is considering nominating Sarah Raskin, the Maryland Commissioner of Financial Regulation, and Massachusetts Institute of Technology economist Peter Diamond, sources close to Obama say.

Should all three nominees become appointed, Obama would have a clear majority in the Federal Reserve's board to enact his economic policies and broaden financial controls of banking and investment banking.

Obama's three nominees to the Fed would most likely result in a reluctance to increase interest rates.  Since the recession began, the Fed has been operating with only five board members.

Due to Yellen's close support of the Fed Chairman she is most likely to be the spokesperson over Fed policy with the regional banks, which is needed to build a consensus in shaping Fed policy.  With six years to have built relationships with other regional Fed presidents, Yellen would have an easy time in communicating Bernanke's plans to remold the US Centeral Bank.  How that would play out in control of financial institutions has yet to be determined, but many lawmakers are concerned about the Fed's future role in regulating the financial community overall.

Senate Banking Committee Chairman Chris Dodd (D-CT) has been trying to spearhead a bipartisan regulatory reform deal with Republican Sen. Bob Corker, but ran into trouble when he found the amount of concessions he would have to give up for just one GOP vote could jeopardize his relationship with fellow Democrats.

As a result, Dodd said Thursday he would present his own version of a regulatory reform bill for vote before Easter.

"It isn't just two of us here," Dodd said. "Obviously we are dealing with a lot of members who have a lot of ideas and who have a lot of interests, and as chairman of the committee I need to try to pull that together in a way that produces a consensus bill, and that means a consensus on all sides."

Ranking Republican Committee Member, Sen. Richard Shelby (R-AL) said in response, "As long as we remain focused on policy and not politics, an agreement is still very possible."

"Republicans remain open to finding common ground with Chairman Dodd," Shelby stated.  "If my Democrat colleagues are interested in enacting reforms that protect American taxpayers, promote economic growth, and preserve the competitiveness of our financial markets, there is no reason that we cannot reach an agreement."