Posted on Fri, Nov. 21, 2008
last updated: November 24, 2010 01:49:18 PM
WASHINGTON — New York Federal Reserve Bank President Timothy Geithner is expected to be President-elect Barack Obama's choice to head the Treasury Department. Reports of his selection sent stocks soaring at the close of trading Friday.
The anticipated nomination, which the financial cable channel CNBC and The Wall Street Journal reported shortly before the New York Stock Exchange's closing bell, sent the Dow Jones Industrial Average up nearly 500 points, or 6.5 percent, in the final hour of trading after two days of steep declines.
Obama's transition team and the Federal Reserve declined to confirm that Geithner had been offered and accepted the post, but neither made any attempt to knock down the reports. Obama now is expected to name his full economic team before Thanksgiving.
Geithner, 47, has worked at Treasury for two decades. He joined Treasury in 1988 and climbed the ranks, topping out as undersecretary for international finance from 1999 to 2001. Since 2003, he's headed the New York Fed, one of the most powerful yet little known federal regulatory posts.
"He's a great appointment. He's smart. He's got continuity," said Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee. "I think he understands the importance of good regulation that is tough without stifling initiative."
Alan Blinder, a former Fed vice-chairman, echoed that sentiment, saying that Geithner "brings to the job intelligence, a wealth of experience in crisis management, deep knowledge of everything that has been going on in the last year, and an ability to listen and learn." Blinder, a Princeton University economist, added: "The struggles that any new secretary of the Treasury would face are legion. Tim is coming in down five runs in the eighth inning."
The president-elect has been under pressure to start rolling out his Cabinet picks in the face of continued turmoil on Wall Street and stepped-up speculation and leaks.
On another Cabinet front, a spokesman for New York Sen. Hillary Clinton said Friday that reports that she had definitively been offered and accepted the post of secretary of state were "premature." But he said that discussions were "very much on track."
Although he hasn't formally announced any Cabinet choices, Obama is believed to have selected Eric Holder as his attorney general and former Senate Majority Leader Tom Daschle of South Dakota as secretary of health and human services.
New Mexico Gov. Bill Richardson is also close to being named secretary of commerce, though that decision is still under review, according to insiders who spoke on condition of anonymity because they weren't authorized to disclose the information. Richardson, who like Clinton was an Obama rival for the Democratic presidential nomination, was secretary of energy and U.N. ambassador under President Bill Clinton.
The Republican National Committee wasn't impressed.
"Apparently, Washington outsiders need not apply in the Obama administration. Barack Obama's Cabinet is starting to resemble a Clinton reunion. His appointments so far have been a disappointment for Americans hoping to see some fresh faces in Washington. Obama promised a less political White House, but his new chief of staff and political director could not be more partisan. Earlier this month, voters demanded change, but so far Obama is only offering more of the same," said Alex Conant, an RNC spokesman, in a statement.
Amid all the Cabinet buzz, the Obamas also reached an important family decision: where their daughters Malia, 10, and Sasha, 7, will attend school in Washington. The family chose the private Sidwell Friends School, which Chelsea Clinton attended when her father was president, the transition office announced.
Most attention focused Friday on Geithner, who's been among the key decision-makers in combating this year's financial crisis. Economists said that Obama picked a solid behind-the-scenes operator who may not be a household name but has been instrumental in preventing a collapse of the global financial system.
"At a critical time for the U.S. economy, Tim Geithner would bring to the job a unique and impressive combination of wisdom, experience and expertise," Mohamed El-Erian, co-chief executive of Pimco, the world's largest bond fund, said in an e-mail to McClatchy. "It's a great choice."
Geithner is a veteran of the Clinton administration's Treasury team. He served as a protege of both Robert Rubin and Larry Summers, two Clinton Treasury secretaries who also were rumored in the mix for Obama's pick.
Since November 2003, Geithner has headed the powerful New York Fed, the bank in the Federal Reserve system that works most closely with Wall Street and global finance. That position also made him the vice chairman of the Fed's interest rate-setting Federal Open Market Committee, which means that he's also been an important voice in making U.S. monetary policy for the past five years.
Geithner has worked closely with Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke during this year's unprecedented financial challenges, which include government seizures of banks, mortgage finance companies and the nation's largest insurer.
James Paulsen, the chief investment strategist for Wells Capital Management, an arm of Wells Fargo Bank, said that Geithner's Treasury Department would have a chance to show a steady hand after several missteps by the Bush administration.
"I hope they reflect the 'no drama' Obama personality, which I think may help the most," Paulsen said.
Geithner also had one important credential that several other rumored candidates lacked — he's untainted by personal employment and enrichment in private-sector finance, said Vincent Reinhart, who worked closely with the Treasury designee as the former director of the Fed's monetary affairs division.
"He's had a very decided advantage over other candidates in that he hasn't been associated with the private sector, and this is not an environment where you want to get the next secretary from a hedge fund or Goldman Sachs or Citigroup," Reinhart said. "He is familiar with the risks that government has taken on, he was there, present at the creation."
While not cut from Wall Street cloth, Geithner knows that world intimately as New York Fed chairman — and by virtue of having worked the past year to prevent its destruction.
"He knows the Street, he knows the guys on the Street. He's been at the center of the financial mess from the beginning," said David Wyss, chief economist at the New York ratings agency Standard & Poor's. "All of that sort of made him a likely candidate."
Former colleagues remember Geithner with fondness.
"He's easy to work with. He's very focused and results-oriented, while being inclusive and easy to get along with. That's a great combination," said Gary Gensler, who was the assistant secretary for financial markets during the second Clinton term and worked closely with Geithner.
In the brief period after he left Treasury and before he became president of the New York Fed, Geithner was director of policy development at the International Monetary Fund. His ties to the IMF are sure to be useful, as that institution is being asked to play a larger role in helping developing nations survive the current turmoil in global financial markets.
MORE FROM MCCLATCHY
McClatchy Newspapers 2008