U.S. Treasury Secretary Timothy F. Geithner, the most senior Obama administration official remaining from the team that grappled with the worst financial crisis since the Great Depression, leaves office today as his likely successor seeks Senate approval.
Geithner, 51, hands a more stable economy to Jack Lew, President Barack Obama’s nominee, as the administration bounces from one confrontation to another with Republican lawmakers on issues including the budget and the debt ceiling. Geithner hasn’t said publicly what his next career move will be.
As Obama’s former budget chief, Lew “is going to have a harder time than Geithner” in dealing with Congress, said Joseph Engelhard, a former Treasury official who is now senior vice president at Capital Alpha Partners LLC, a Washington-based consultant and investment advisory firm. “Probably the most polarizing question on Capitol Hill right now is when are they going to balance the budget.”
The House of Representatives voted this week to suspend the $16.4 trillion federal borrowing limit until May 19, removing for now the most contentious fiscal issue facing Obama. Republicans are trying to prompt the Democratic-controlled Senate to approve an annual budget, something it hasn’t done in four years, by withholding lawmakers’ pay if a spending package isn’t passed by April 15.
Deputy Treasury Secretary Neal Wolin will be acting secretary after Geithner leaves today. Wolin, 51, was a key negotiator with Congress on the Dodd-Frank financial overhaul law. He’s a former chief operating officer of Hartford Financial Services Group Inc. and was a legal adviser to the White House National Security Council during President Bill Clinton’s administration.
Lew, 57, who ran a surplus for three consecutive years as U.S. budget chief under Clinton, has been meeting this week with senators who will vote whether to confirm him. The Senate Finance Committee, which has jurisdiction over Lew’s nomination, hasn’t set a date for a confirmation hearing.
Senate Democrats including Finance Committee Chairman Max Baucus of Montana, Charles Schumer of New York and Debbie Stabenow of Michigan said they will support Lew. Republican Senator Jeff Sessions of Alabama has said he will oppose him and Utah’s Orrin Hatch, the Finance Committee’s ranking Republican, said he hadn’t decided.
Lew is less familiar than Geithner with financial regulatory issues such as systemic risk and the so-called Volcker rule ban on proprietary trading, said Brian Gardner, a senior vice president and Washington analyst at investment bank Keefe, Bruyette & Woods. The rule is named for former Federal Reserve Chairman Paul Volcker, an early proponent.
“By the time he gets to the Senate Finance Committee he will have been fully prepped on all this and no one will notice that he doesn’t have a long history,” Gardner said. “I would be very surprised if he fumbled anything.”
While the budget is “going to be front and center,” Lew also will have to address how he plans to deal with foreign- currency issues such as how hard to press China on strengthening the yuan, said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. Lew will probably continue Geithner’s approach of quiet diplomacy rather than confront China, he said.
Since Geithner took office in January 2009 he has overseen the Troubled Asset Relief Program bailouts of companies including Citigroup Inc. (C:US) and General Motors Co. (GM:US), steered the financial rules revamp, and negotiated with congressional leaders on the budget and raising the debt limit.
He departs after almost a decade as a top decision-maker on U.S. economic and monetary policy. He went to the Treasury after more than five years as president of the Federal Reserve Bank of New York. In 2008, then-Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben S. Bernanke and Geithner initiated the bailouts of Wall Street banks and insurer American International Group Inc. (AIG:US), and allowed Lehman Brothers Holdings Inc. to go into bankruptcy.
The bank portion of TARP, criticized by both Republicans and Democrats for being too generous to Wall Street, has been profitable. The Congressional Budget Office projected in October that TARP overall will cost taxpayers $24 billion, down from an estimate of $109 billion in March 2010.
In the quarter Geithner took office, the U.S. lost more than 2.3 million jobs and gross domestic product was shrinking at a 5.3 percent annual rate. For the quarter ending Dec. 31, 2012, 453,000 jobs were added, and the economy grew at a 1.2 percent annual rate, according to projections from economists surveyed by Bloomberg.
Still, the U.S. has suffered what Geithner referred to in July 2011 as “unacceptably high, terribly high” unemployment. The jobless rate has fallen from 9 percent that month to 7.8 percent in December, matching the lowest rate in four years.
The Standard & Poor’s 500 Index has more than doubled since reaching a 12-year low on March 9, 2009. The yield on 10-year Treasury notes declined from 2.84 percent at the end of January 2009 to 1.85 percent yesterday.
Even so, the deficit has surpassed $1 trillion in each of the last four fiscal years, and public debt as a percentage of GDP is the highest since 1950.
Spending as a share of the economy dropped last year to 22.8 percent, the lowest level since 2008, according to Congressional Budget Office data. That’s down from 24.1 percent in 2011 and a 64-year high of 25.2 percent in 2009, when Obama pushed through an $831 billion stimulus package.
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