With financial markets suffering a major relapse and the larger economy reeling, President-elect Barack Obama sought to deliver a message of reassurance Friday by selecting as his treasury secretary the head of the Federal Reserve Bank of New York, Timothy Geithner, an advocate of government intervention who nonetheless commands wide respect among conservatives.
Geithner, 47, has been a central player in the Bush administration’s response to the economic crisis, and his selection indicated the new administration’s desire to hit the ground running with a leader of Obama’s economic team who knows the game and supports the idea of vigorous action by Washington.
Obama is expected to announce Geithner’s selection as early as Monday, a Democratic aide said.
Word of Geithner’s appointment Friday afternoon sent the Dow Jones industrial rocketing up. It closed up 494 points, or 6.5 percent, erasing Thursday’s drop of nearly 450 points.
News of the decision came against a backdrop of rising concern over a perceived leadership vacuum in the capital. As panicky financial markets posted precipitous losses — and as Congress deadlocked over a bailout for Detroit as well as a new economic stimulus package — the Bush administration startled analysts by indicating it planned no new economic initiatives for 2008.
Geithner’s appointment drew support from across the political and ideological spectrum.
“He’s smart and levelheaded,” said Alice Rivlin, a Democrat and former vice chairwoman of the Federal Reserve Board. “His involvement in the crisis … is a very important qualification.”
“It’s a terrific choice,” said Kevin Hassett, director of economic policy studies at the American Enterprise Institute, a conservative think tank. “He’s been in the middle of this, he has been at Treasury and he’s a very bight guy, highly respected by people in both parties.”
Obama also moved to solidify the rest of his economic team, offering former Clinton administration Treasury Secretary Lawrence Summers a role as a senior White House adviser. Summers, a brilliant economist with a tendency to generate controversy, had been a leading contender to be Obama’s Treasury secretary, along with former Federal Reserve Board Chairman Paul Volcker.
Geithner, 47, is a protege of Summers and of former Clinton administration Treasury chief Robert Rubin.
Geithner worked with Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke on the government-engineered sale of Bear Stearns, the bailout of American International Group and the decision not to prop up Lehman Brothers.
News of Obama’s choice leaked just as he began facing criticism for not moving quickly enough to show Wall Street how he planned to approach the crisis. Critics also suggested that by moving quickly, Obama could show his team would have time to prepare for taking action as soon as the new administration takes office Jan. 20.
“This is all about confidence. It’s going to get worse. Fear is going to take over,” former General Electric chief Jack Welch said on CNBC. “We have a new president, and the fastest we can get the policies out there that tell us where we are going to go and what this administration is going to do, the better off we’re going to be.”
While the severity of the present crisis — and the perception that the Bush administration was stepping back from the game — generated impatience, Obama has moved extraordinarily swiftly to assemble a new economic team. It’s likely to include New Mexico Gov. Bill Richardson as commerce secretary and Congressional Budget Office Director Peter Orszag as head of the White House Office of Management and Budget.
Geithner’s career began at Kissinger Associates, the high-powered consulting firm of former Nixon secretary of state Henry Kissinger, during the mid-1980s and at Treasury in Washington during the late 1980s and early 1990s.
As president of the New York Fed, Geithner has been the central bank’s chief representative to Wall Street and the international financial community.
Throughout the crisis, Geithner has pushed for aggressive intervention in companies’ troubles, and has defended the actions of Bernanke and Paulson.
“He’s been at the very center of the crisis. Every other player, whether banker or central banker or reporter, wants to talk with him,” said Jan Hopkins, president of the Economic Club of New York.
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Geithner, in brief
BORN: Aug. 18, 1961, New York City.
EXPERIENCE: Kissinger Associates Inc., 1985 to 1988; Treasury Department, 1988-2001, including undersecretary of treasury for international affairs; director of the policy development and review department, International Monetary Fund, 2001-03; chief executive officer, Federal Reserve Bank of New York, 2003-present.
EDUCATION: B.A., Dartmouth College, 1983; M.A. at Johns Hopkins School of Advanced International Studies in 1985.
–The Associated Press
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Jim.Puzzanghera@latimes.com
Peter.Gosselin@latimes.com
