Various news outlets are reporting that on Monday, Barack Obama will announce his pick for Treasury secretary: Tim Geithner.
Compared to the other leading contender, Larry Summers, a former Clinton Treasury secretary, Geithner, the president of the New York Federal Reserve, is relatively unknown. Geithner is a career economist (with no Ph.D.)–no Wall Street master of the universe–who has worked in three administrations for presidents of both parties. He’s been described as not an imposing figure, but a rather competent and steady person. Which may be why the Dow Jones shot up after word of his appointment leaked. (Take that, Hank Paulson!)
In March, Financial Times published a profile of Geithner. Some interesting bits:
People have made the error of mistaking his easy manner for a lack of confidence or steel. In reality, although he is widely described as nice, Mr Geithner can be forceful. “Everyone tends to underestimate him,” says a former colleague. “If he was a bigger person physically, people might say he was president material, since he has that aura of power. But because he is slight and he looks young, people underestimate him.”
….Mr Geithner joined the Treasury in 1988 and spent time as assistant attaché at the US embassy in Tokyo – witnessing the onset of a decade of stagnation in Japan – before [during the Clinton years] joining Mr Summers’s international team under Robert Rubin, Treasury secretary. He rose rapidly, playing a big part in shaping the US response to the Asian crisis. “He is very bright, independently minded, thoughtful, and has an unusual sense of public service – he is a very easy person to get along with,” says Mr Rubin. “He is practical, worldly in the sense that he has a feel for things – for the psychology of markets, the politics of what he is doing – and a good sense of humour.” For a high-flying public official, Mr Geithner has remarkably few enemies.
According to FT, Geithner took some–though not fully adequate–steps to counter the credit crisis earlier this year:
He thinks in probabilistic terms – worrying about “fat tail risks” of adverse possible outcomes even in good times. Long before the credit crisis broke, he led an effort to strengthen the infrastructure underlying the over-the-counter derivative market. But he did not spot how rusty the Fed’s liquidity support tools had become, or the vulnerability of the banks to the credit woes, until the crisis erupted, and in the past months has been forced to improvise repeatedly to find ways of pumping cash into frozen parts of the financial system. Recently the Fed has innovated at a remarkable pace. Still, most analysts believe it did too little to contain money market strains in the early months of the crisis.
And FT noted:
Peers see Mr Geithner as pragmatic – someone who focuses on what can be achieved and will not let the best be the enemy of the good….Mr Geithner tends to “smell” his way through situations, a senior central banker says….Mr Geithner is not an intellectual force in the way Mr Summers, Mr Bernanke or Mr King – all professional economists – are. But he understands the issues….For someone who has never worked in the private financial sector, he has a subtle sense of markets’ psychology.
So he’s not a big macher like Rubin or Summers. But he’s sure close to them. (And he worked in the mid-1980s for Kissinger Associates, the consulting firm run by former Secretary of State Henry Kissinger that refuses to disclose its clients.) Obama is choosing a fellow who appears to bring a Summers-like policy approach to the post without the Summers baggage. After all, Geithner has been part of the system that has failed, even if he did try to a limited degree to stop the crash.
Bottom line: Geithner is a conventional and safe choice. And you know those markets. They can get awfully nervous very easily–especially these days. Obama seems to be looking to soothe them without starting up yet another soap opera (which is what would happen if he were to tap Summers). Geithner is no drama. And there’s already plenty of that when it comes to the economy.
P.S. Same news reports are noting that New Mexico Governor Bill Richardson, whose support of Obama during the primaries caused James Carville to call him a Judas, will be selected to run the Commerce Department.