Geithner: Obama's Likely Treasury Choice

The president of the New York Federal Reserve Bank would be the Obama Administration's man in charge of tackling the financial crisis

By Theo Francis

President-elect Barack Obama appears set to nominate New York Federal Reserve Bank chief Timothy Geithner as his Treasury Secretary, proposing to put in the critical post a professional bureaucrat who hasn't worked for Wall Street but has a record of working closely with it, earning the respect of the industry, as well as that of many lawmakers and regulators.

The announcement could come as soon as Monday, Nov. 24, along with other members of an Obama economic team.

As word of the decision spread, the stock market began a steady climb, closing up more than 6%. It had been slightly down for the day when NBC reported around 3 p.m. Eastern time that Geithner would get the nod.

"As much as you want some fresh ideas in there, I think at this point in time, having some continuity in there is a good thing," said Frederick Cannon, chief equity strategist at the research firm Keefe Bruyette & Woods. "The main thing the markets need is confidence."

Vulnerable to Criticism

Geithner has been deeply involved in virtually every step of the federal government's response to the financial crisis, from the subsidized sale of Bear Stearns last spring to the rescue of American International Group (AIG) this fall.

That experience could stand him in good stead as the Obama Administration takes office amid what is likely to be a bad recession, and possibly a continuing financial crisis. At the same time, it also opens him to criticism by those who say the government's response has been tepid, chaotic, and poorly conceived.

Widely described as low-key and even-tempered, yet a man of action who isn't afraid to make bold moves or take responsibility for them, Geithner is also young—at 47, his birthday is two weeks before Obama's—and lacks both the years of experience on Wall Street or in corporate boardrooms, and the advanced training in economics that has prepared many of his predecessors.

Kudos from Kissinger

Former Secretary of State Henry Kissinger, for whom Geithner did research early in his career, was previously quoted in The New York Sun as calling the New York Fed president "extremely intelligent," and someone who "prevails with the power of his argument" rather than by charisma alone. Some believe his polish and credibility could help him avoid what have been perceived in many quarters as missteps—errors of presentation if not of policy—by Treasury Secretary Henry Paulson. Among those who have lauded him: Representative Barney Frank (D-Mass.), chairman of the House Financial Services Committee.

Brad Setser, a former Treasury official who worked briefly for Geithner both there and at the International Monetary Fund, said he has "a great deal of confidence that Tim can communicate effectively with a broad public." Setser, who is a fellow at (and blogs for) the Council on Foreign Relations, said Geithner is particularly skilled at thinking ahead, "anticipating where the world will be in three or six months' time" and how policy can help.

Market participants were strong in their praise for Geithner as the news of his likely nomination pushed stocks up on the afternoon of Friday, Nov. 21. "I expect he will treat the current situation with the urgency that it deserves," says Ward McCarthy, principal at Stone & McCarthy Research Associates, an economic and fixed-income research firm. "I also expect him to be far more creative than Treasury Secretary Paulson."

Part of the System

Peter Cardillo, chief market economist at Avalon Partners, credits the rally at least in part to the fact that Geithner is steeped in the financial rescue to date and is likely to continue those efforts, but there is also hope he will improve on some of Paulson's missteps. "If you look at the rally it's pretty solid, and even some of the bank stocks are coming off their lows," says Cardillo. "He has a lot of experience and certainly he knows the canyons of the financial markets."