NBC is reporting that, in one of the least surprising choices of recent days, Barack Obama is going to tap Tim Geithner as Treasury Secretary. Former Treasury chief Larry Summers had been the subject of the most discussion in recent weeks, mainly because he’s said so many entertaining things through the years, but the actual betting was always on the more diplomatic, less controversial Geithner.
Geithner, 47, has been president of the Federal Reserve Bank of New York for the past five years. Before that he worked for a couple of years at the International Monetary Fund, and before that he was Larry Summers’ right-hand man at the Treasury Department. He and Summers remain close.
At the New York Fed, Geithner has been central to the efforts over the past year to keep the country’s financial system from collapsing. That means he’s been the point man in the controversial Fed-assisted sale of Bear Stearns and bailout of AIG, which will surely bring some pointed questions at his confirmation hearing. But given his bravura performance at the Senate Banking Committee hearing about the Bear Stearns deal in April, I’m betting he won’t have really major problems.
Markets seemed to like the choice a lot, with the Dow suddenly jumping about 200 points right after CNBC reported the news. Geithner is seen as extremely competent, he knows his way around the Treasury Department, and he’s already in regular contact with the current occupant of the job.
One thing Geithner doesn’t have much background in is economic policy other than financial policy (at Treasury his big job was jetting around the world fighting the emerging markets financial crises of the late 1990s). So the other names on the economic team that Obama is set to announce Monday are going to be important. They’re likely to be the ones designing a stimulus package while Geithner spends his days trying to make the banking system work again.
Update: Word is that Bill Richardson will be Commerce Secretary. I can’t recall any Commerce Secretary who has played a major role in shaping economic policy, though.
Update 2: The Dow ended the day up 494 points (it was down about 40 when the news broke). The Geithner rally! Can it continue? The Krugman rally didn’t.
Also, as I think about this more I realize that Geithner’s most important role at Treasury will be redoing the country’s (and possibly the world’s) financial regulatory set-up. He’s pretty well prepared to do that. Before the financial crisis began last year, he was on a crusade (a polite, Geithneresque crusade) to push for more transparency and “stress-testing” of hedge funds and in the credit default swap market. In a much-remarked upon speech in May 2007 he recited the usual Greenspan line about derivatives making the world less risky, then contemplated the possibility that while they perhaps reduced the risks of moderate financial shocks, they could make a significant financial crisis much, much worse:
This judgment, that systemic financial crises are less probable, but in the event they occur could be harder to manage, should be the principal preoccupation of market participants and policymakers today.
Uh, yes, I guess it should.
Update 3: Bloomberg says Summers will have “a senior White House role.”
