While former Washington insiders Lawrence Summers and Paul Volcker represent safe and solid choices for Obama’s Treasury Secretary, his actual pick—Timothy Geithner—is exactly the kind of bold decision analysts expect from Obama if he is serious about improving this nation’s economy.
CNBC first broke the news of Geithner’s appointment on Friday, prompting the Dow to surge more than 494 points in late Friday trading. Geithner is the current president of the Federal Reserve Bank of New York (FRBNY).
Current Treasury Secretary Hank Paulson and his policies have become unpopular as the controversial Troubled-Asset Relief Program (TARP) bailout package has increasingly strayed from its original intentions of buying up mortgage-related assets from banks.
The 47-year old Geithner is indeed a newcomer to Washington, but that is unlikely to affect his ability to work with Congressional officials. After all, Geithner already is a pro in the bailout business—and is known as a tough negotiator with a sense of humor.
Geithner was at the front lines of the recent Wall Street crisis. He orchestrated the sale of troubled investment bank Bear Stearns to JPMorgan Chase earlier this year, when FRBNY lent JPMorgan $29 billion to buy out its smaller rival.
He was also a major player in the Federal Reserve’s recent bailout of insurance giant AIG, and in its controversial decision to let investment bank Lehman Brothers collapse in September. His skill in negotiating with CEOs of major Wall Street banks is something few prior Treasury Secretaries can claim.
A Fresh Face
Geithner’s unusual background lends well to his non-partisan and “outsider” persona. He never attended business school and did not work as a banker in the private sector. He holds a master’s degree in international economic from Johns Hopkins University, and like Obama, Geithner spent part of his youth living abroad.
Since the Presidential election, the Dow Jones Industrial Average has plummeted 1579 points (16.4 percent) as of Friday. Financial industry bellwether Citigroup saw its shares fall to record lows, and Detroit’s “Big Three” totter on the verge of collapse. The new Treasury Secretary will likely be greeted by dismal economic readings and a score of companies pleading for federal financial backing.
For one, the financial sector will likely benefit the most from Geithner’s appointment. FRBNY was Federal Reserve’s main link to Wall Street, and most Wall Street CEOs are familiar with Geithner and his policies.
If his track record this year proves anything, Geithner isn’t likely to wait around for endless debates, bureaucracy, and politics to come up with solutions. FRBNY’s decisions regarding Bear, AIG, and Lehman were all made quickly and unambiguously.
As retirement savings dwindle and a majority of the nation’s people deeply worried about their financial well-beings, Obama’s Treasury pick reflects his urgency and the President-elect’s genuine concern regarding the U.S. economy.
Obama, on his weekly radio address, conceded that the economy is likely to “get worse before it gets better.”
The President-elect promised last week that his team is working on a plan to create 2.5 million jobs across the United States.
“We'll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels,” Obama said in the address.
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