Obama Said to Pick Geithner as Treasury Secretary (Update2)
Nov. 21 (Bloomberg) — 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.
Obama is also likely to nominate New Mexico Governor Bill Richardson as Commerce Secretary, and to announce his picks on Nov. 24, the person said on condition of anonymity.
Geithner has helped lead U.S. efforts to combat the deepest financial crisis in seven decades, helping oversee the decisions this year to intervene in American International Group Inc., rescue Bear Stearns Cos. and leave Lehman Brothers Holdings Inc. to fail. Summers was Bill Clinton’s last Treasury secretary, and is now a professor at Harvard University.
Both Geithner and Summers are veterans of managing financial turmoil, having worked together on the Asian financial crisis of 1997-98 and helping prevent a Mexican default earlier that decade. They will be charged with shepherding Obama’s plans for a fiscal stimulus to cushion an economy that analysts say is in its deepest recession in a quarter century.
Geithner, 47, served as an undersecretary for international affairs under Summers, 53, and has served at the helm of the New York Fed since November 2003.
Stocks rallied after news of Obama’s choice, with the Standard & Poor’s 500 Stock index rising 5.2 percent to 791.54 at 3:54 p.m. in New York. The index is still heading for its biggest annual decline on record.
Kevin Warsh, a Fed Board governor, is a leading contender to succeed Geithner at the New York Fed, a U.S. official said on condition of anonymity.
As head of the New York Fed, Geithner has served as the central bank’s top liaison with Wall Street. Geithner oversaw meetings at his bank to attempt to head off Lehman’s failure in September, later hosting gatherings on how to resolve AIG.
Geithner is no stranger to Washington or the Treasury. Before taking over the New York Fed in 2003, he spent most of the previous 18 years working in the nation’s capital, first at Kissinger Associates, then at the Treasury and finally at the International Monetary Fund.
Over that time, Geithner earned what his one-time mentor Summers called a “doctorate in financial policy.” He also developed a skill-set his supporters say makes him well suited for his new job: calmness under pressure, an ability to see many sides of a problem and a sense of the politically possible.
“During the Mexico crisis, some of us would occasionally be emotional about something,” said Jeffrey Shafer, who served with Geithner at the Treasury from 1993 to 1997 and who is now Vice Chairman of Global Banking for Citigroup Inc. in New York. “Tim was the calm guy in the room who made sure we looked at all sides of the issue.”
Geithner, who has studied Japanese and Chinese and has a Master of Arts in international economics from Johns Hopkins University, also played a key role in the Treasury’s dealings with the Finance Ministry in Tokyo. He was less inclined to intervene in currency markets than some other officials at the time, according to Shafer.
Dino Kos, a former New York Fed official, described Geithner as a “pragmatist, not an ideologue” who has a good sense of the political dynamics in Washington and the need to keep lawmakers in the loop about what’s going on. That’s been especially important in the current crisis as the Fed has taken extraordinary actions to limit the financial fallout, including its rescue of insurer American International Group in September.
“If you’re going to push the envelope — as the Fed has been doing — you need to keep legislators informed about what you’re doing and why you’re doing it,” said Kos, who’s now a managing director at Portales Partners in New York.