WASHINGTON — President-elect Barack Obama will name Timothy F. Geithner, president of the Federal Reserve Bank of New York, to be his Treasury secretary, moving to fill a key post at a moment when the quavering financial markets are looking for reassurance about the direction of economic policy, people briefed about the decision said Friday.
In picking Mr. Geithner, who has been at the center of efforts to contain the financial crisis, Mr. Obama passed over Lawrence H. Summers, who was Treasury secretary in the final year and a half of the Clinton administration. The president-elect might name Mr. Summers, a highly regarded economist and a former president of Harvard University, as a senior White House adviser, people involved in the transition said.
Word of Mr. Geithner’s selection helped drive stocks sharply higher on Friday afternoon as investors concluded that Mr. Obama was taking steps to fill a leadership vacuum at a time when the economy and financial markets are showing new signs of strain. The Dow Jones industrial average closed up 494 points, a 6.5 percent gain after days of dizzying declines.
With Congress having left town on Friday after doing little to address the deteriorating economy and President Bush opposing additional steps, Mr. Obama was under increasing pressure to signal his intentions and flesh out his team to deal with a crisis that now has financial institutions and automakers struggling to survive and that shows signs of deflation as fearful consumers quit spending. Mr. Obama is expected to announce his selection of Mr. Geithner, and perhaps other economic advisers, on Monday.
David Kotok, chairman of the money-management firm Cumberland Advisors in Vineland, N.J., welcomed the news about Mr. Geithner in particular, but he attributed the market rally to relief that Mr. Obama seemed to have made a decision. “The most important thing for the market and for the economy is that these decisions are made and uncertainty is removed,” Mr. Kotok said. “It probably would have been the same rally had it been someone else on the short list.”
Mr. Obama said days after his election on Nov. 4 that he would try to name his economic and national security teams more quickly than past presidents-elect, given that the country is in a worsening recession and fighting two wars. The job of Treasury secretary, always one of the most prestigious in the cabinet, has gained outsize stature as the economy has continued to weaken and the Treasury secretary has been put in charge of a $700 billion financial bailout program.
Mr. Geithner and Mr. Summers emerged quickly as the unlikely rivals for the post. Mr. Geithner once worked for Mr. Summers, who promoted the younger man at the Treasury Department when Mr. Summers was first deputy secretary and then secretary.
Mr. Obama does not know either man well, but he knows Mr. Summers better because Mr. Summers was an occasional economic adviser during the presidential campaign and was named to Mr. Obama’s economic advisory board for the transition.
But people close to Mr. Obama say that he clicked with Mr. Geithner during a recent private meeting. The two men are the same age, 47, and Mr. Obama is closer temperamentally to the low-key and almost boyish Mr. Geithner than to the more tightly wound Mr. Summers. Mr. Summers, who will be 54 on Nov. 30, is universally described as brilliant, but is also renowned for being arrogant, occasionally rude and sometimes difficult to work with.
He left Harvard’s presidency after controversies that alienated faculty and women’s groups. Several feminist leaders in Washington said they had registered objections about Mr. Summers to the Obama team, but were not going all out to oppose him.
As a special White House adviser to Mr. Obama, however, Mr. Summers could have influence rivaling the Treasury secretary’s own. That would be doubly true if he were viewed as the nation’s next central banker: two Obama advisers say Mr. Summers would be the leading candidate to become the next Federal Reserve chairman should Mr. Obama choose not to reappoint Ben S. Bernanke when Mr. Bernanke’s term ends Jan. 31, 2010.
In choosing Mr. Geithner, Mr. Obama would signal both a change at the Treasury Department and continuity in its economic rescue efforts. With the current Treasury secretary, Henry M. Paulson Jr., and Mr. Bernanke, Mr. Geithner — who as head of the New York Fed is the central bank’s eyes and ears on Wall Street — has been part of a troika that has struggled this year to contain the credit crisis.
“You can’t bring in a guy who needs on-the-job training,” said Kenneth S. Rogoff, a professor of economics at Harvard who once worked with Mr. Geithner at the International Monetary Fund.
Along with Mr. Paulson and Mr. Bernanke, Mr. Geithner has come under criticism for the original construction of the $700 billion bailout plan, which had to be overhauled and has so far failed to remedy the financial crisis.
But his association with the current administration’s policies is balanced by his close connections to the centrist Democratic policies of President Bill Clinton and Mr. Clinton’s best-known Treasury secretary, Robert E. Rubin. Mr. Geithner served under Mr. Rubin as well as Mr. Summers at the Treasury Department in the 1990s, and rose to be under secretary for international affairs.
Rubin protégés in fact are likely to dominate the Obama economic team. In addition to Mr. Geithner and Mr. Summers, Mr. Obama is expected to name as his budget director Peter R. Orszag, a Clinton administration economist and Rubin ally who is now head of the Congressional Budget Office.
Michael Froman, Mr. Rubin’s former Treasury chief of staff and Mr. Obama’s classmate at Harvard Law School, is heading the economics personnel search for the transition. Mr. Froman’s head-hunting deputy is Mr. Rubin’s son, James Rubin.
Paul Calello, chief executive of the investment bank at Credit Suisse, said Mr. Geithner “has the intellect, the experience and the ability to work across many constituencies that you need in that job. It’s also important to note that Tim has both the domestic and international experience that is going to be very important going forward.”
The Rubin wing of the Democratic Party has long been disparaged by liberals and union leaders as being too concerned with balanced budgets and free trade. But much of the ideological tension in the party has dissipated as the economy has weakened, and Mr. Obama has signaled that he intends to spend what it takes to get the economy back on track.
Mr. Geithner also seems to fit Mr. Obama’s emphasis on “post-partisanship.” Associates say Mr. Geithner is an independent, though he was a Republican when he first was a staff member at the Treasury Department in the late 1980s under Presidents Ronald Reagan and George Bush. After college, he worked in the New York-based international consulting firm headed by Henry A. Kissinger.
After leaving the Treasury Department, Mr. Geithner worked at the International Monetary Fund until he was hired in 2003 as president of the New York Fed.
As the bank’s president, Mr. Geithner has had a seat on the Federal Open Market Committee, which sets short-term interest rates. He spent two years studying the complexities of the new credit derivatives that spread financial risk, but also exacerbated the economic downturn when the credit squeeze set in.
“The fact that the banks are stronger and risk is spread more broadly should make the system more stable,” Mr. Geithner said in an interview in early 2007. “We can’t know that with certainty, though. We’ll have a test of that when things next threaten to fall apart.”
The test began later that year as the housing credit crisis took hold. Working closely with Mr. Bernanke, Mr. Geithner early this year engineered the $30 billion bailout of Bear Stearns. Since September, the two of them and Mr. Paulson together have steered the government takeover of the mortgage giants Fannie Mae and Freddie Mac, bailouts of American International Group and a number of financial institutions, and the design of the $700 billion bailout program.
Mr. Geithner has also had a part in some high-profile missteps, including the government’s decision to allow Lehman Brothers to fail; some experts say that destabilized markets and helped to spread the financial contagion globally.
“He knows better than almost anyone else the ins and outs of the bailout,” said Simon Johnson, a professor of economics at the Massachusetts Institute of Technology. “The question is, whether that’s an advantage or a disadvantage.”
On the plus side, Mr. Johnson said Mr. Geithner could begin working with Mr. Paulson almost from the moment his appointment is announced on how to deploy the remaining $410 billion in the bailout fund.
“The markets will remain disrupted through Jan. 20 without some thoughtful government action,” said Todd Steinberg, head of equities and commodity derivatives at BNP Paribas Americas. “The naming of Geithner certainly increases the possibility of action for a couple of reasons: he is in the government in one of the most influential seats, and he is already actively in dialogue with the current administration’s decision makers.”
Ben White and Vikas Bajaj contributed reporting from New York, and Mark Landler from Washington.http://my.barackobama.com/page/dashboard/public/gGWdjc
Posts
No comments:
Post a Comment