Obama picks Geithner as treasury secretary

Nov 22 | Updated: Nov 23 2008, 07:12am hrs
President-elect Barack Obama picked Timothy Geithner, head of the Federal Reserve Bank of New York, to be his treasury secretary, with Lawrence Summers getting a senior White House role, a Democratic aide said.

Summers, former President Bill Clintons last Treasury chief, would be positioned to succeed Ben S Bernanke as Fed chairman in 2010. Obama is likely to announce his economic team on November 24, the aide said on condition of anonymity. Geithner is a veteran who has helped lead the effort to end the deepest financial crisis in seven decades and at the same time has spent most of his career outside the public eye. The top task of the new team will be assembling Obamas pledged stimulus package to buttress an economy that may be in its worst recession in a quarter century.

Obama is assembling very strong people, very qualified people, said Allen Sinai, chief economist at Decision Economics in New York. But the reality of the problems of the economy, the financial markets, our banking system both domestically and globally, and the long list of problems we have to deal with as a society, that is very daunting.

Geithner, 47, has helped oversee some of the biggest decisions so far in the crisis, as head of the US central banks main liaison with Wall Street. Those include the governments takeover of American International Group Inc., the Feds Bear Stearns Cos. rescue, and decision to let Lehman Brothers Holdings Inc. fail in September.

Both Geithner and Summers are veterans of managing financial turmoil, working together on the Asian financial crisis of 1997-98 and staving off a Mexican default earlier that decade. Even with that background, Geithner would be taking on an unfamiliar role: the governments chief economic spokesman.

He certainly has relevant experience, said Alex Pollock, resident fellow at the American Enterprise Institute in Washington and former president of the Chicago Federal Home Loan Bank. The whole public part of the job, the political part of Treasury secretary, will, I expect, be a challenge.

Investors gave Obamas pick a vote of confidence, sending the US stock markets benchmark index rallying from an 11-year low. The Standard & Poors 500 Index jumped 6.3% to 800.03 at the close in New York. The gauge is still heading for its biggest annual decline since 1931.

Tim is held in high regard in financial circles and has been a thoughtful and effective leader throughout the recent financial turmoil, said Robert Nichols, head of the Financial Services Forum in Washington and a former Treasury spokesman in the Bush administration.

Geithner served as a Treasury undersecretary for international affairs under Summers, 53, and has been at the helm of the New York Fed since November 2003. Summers, who was Treasury chief from 1999 to 2001, and was once named top economist under 40, would be a contender to follow Bernanke, who was appointed by President George W. Bush and whose term ends in January 2010.

Hes certainly on the short list, and perhaps on the top for Fed chief, said Vincent Reinhart, former director of the Feds Division of Monetary Affairs who is now at the AEI in Washington. Summers is now a professor at Harvard University, after previously serving as president of the Cambridge, Massachusetts institution. He spurred controversy while at Harvard over remarks about the number of women in scientific jobs. Summers, along with former Fed Chairman Paul Volcker, were cited as candidates for the Treasury job by people close to the Obama camp earlier this month.

Kevin Warsh, a Fed Board governor, is a leading contender to succeed Geithner at the New York Fed, a US official said on condition of anonymity.

Warsh, 38, previously worked at Morgan Stanley, later joining the Bush White House as an economic-policy adviser. He has been a link for the Fed board with securities firms during the crisis, drawing on his Wall Street contacts and experience.

Obamas nominations would need to be confirmed by the Senate after he takes office on January 20. Bushs Treasury secretary, Henry Paulson, has pledged to work with his successor during the transition.

In his new position as Obamas treasury secretary, it will be up to Geithner to spell out the administrations financial and economic policies to the public. Its not a role he is used to playing. Bloomberg

Hot seat

IGeithner is President and CEO of Federal Reserve Bank of NY since 2003

I Born in New York, Geithner has lived in Africa, India, Thailand, China and Japan. He graduated from Dartmouth College in 1983 with a bachelors degree in government and Asian studies

IHe has been instrumental in helping Hank Paulson resolve the current financial crisis

IGeithner is a protege of Lawrence Summers and has been involved in the bailouts of Brazil, Mexico, Indonesia, South Korea and Thailand in the 1990s as the treasury undersecretary

IHe is credited with warning Wall Street banks in 2006 and 2007 to figure out what would happen to their portfolios

IGeithner, 47, will have unprecedented powers, will be in charge of overseeing a $700-bn rescue program that was enacted last month

IHe would also inherit a record budget deficit.