Timothy Geithner, current president of the New York Fed and voting member of the Ben Bernanke’s FOMC which sets interest rates, will replace Treasury Secretary Henry Paulson in Barack Obama’s new administration. Former Treasury Secretary from 1999-2001 Larry Summers will also have a key economic and regulatory advisory role.
Geithner (pronounced GYTE-ner) has played a key role in managing this crisis—from Bear Stearns to AIG to Lehman and on—so he’s the right guy to manage the Treasury triage strategy for remaining TARP funds, but also he understands our regulatory regime is outdated and needs fundamental reform. Below is a Bloomberg briefing and here are highlights of Geithner’s regulatory philosophy.
GEITHNER, RICHARDSON APPOINTMENTS
Geithner helped lead the U.S. response to the deepest financial crisis in seven decades, including the takeover of American International Group Inc. and Bear Stearns Cos. rescue, and decision to let Lehman Brothers Holdings Inc. fail.
Both he and Summers are veterans of managing financial turmoil, working together on the Asian financial crisis of 1997- 98 and staving off a Mexican default earlier that decade. They will be charged with shepherding Obama’s plans for a fiscal stimulus to cushion an economy that analysts say is in its deepest recession in a quarter century.
Summers, Bill Clinton’s last Treasury secretary and now a professor at Harvard University, would have a post that positions him to succeed Ben S. Bernanke as Fed chairman, central-bank watchers said.
Obama is also likely to nominate New Mexico Governor Bill Richardson as Commerce Secretary, and to announce his picks on Nov. 24, the person said on condition of anonymity. Richardson was Clinton’s Energy secretary and former ambassador to the United Nations.
GEITHNER BIO, SUCCESSOR
Geithner, 47, served as an undersecretary for international affairs under Summers, 53, and has been at the helm of the New York Fed since November 2003.
…As head of the New York Fed, Geithner has served as the central bank’s top liaison with Wall Street. Geithner oversaw meetings at his bank to attempt to head off Lehman’s failure in September, later hosting gatherings on how to resolve AIG.
…Geithner is no stranger to Washington or the Treasury. Before taking over the New York Fed in 2003, he spent most of the previous 18 years working in the nation’s capital, first at Kissinger Associates, then at the Treasury and finally at the International Monetary Fund.
…Geithner, who has studied Japanese and Chinese and has a Master of Arts in international economics from Johns Hopkins University, also played a key role in the Treasury’s dealings with the Finance Ministry in Tokyo. He was less inclined to intervene in currency markets than some other officials at the time, according to Shafer.
Born in New York, Geithner has lived in Africa, India, Thailand, China and Japan. He graduated from Dartmouth College in 1983 with a bachelor’s degree in government and Asian studies. He and his wife, Carole Sonnenfeld Geithner, have two children.
…Kevin Warsh, a Fed Board governor, is a leading contender to succeed Geithner at the New York Fed, a U.S. official said on condition of anonymity.
Warsh, 38, previously worked at Morgan Stanley, later joining the Bush White House as an economic-policy adviser. He has been a link for the Fed board with securities firms during the crisis, drawing on his Wall Street contacts and experience.
ECONOMIC POLICY MAKING APPOINTMENTS
Jacob Lew, the White House budget director under Clinton from 1998 to 2001, will be named to the position of National Economic Council director, a person familiar with the transition team said. Lew, 53, served under Clinton from 1998 to 2001 and is currently chief operating officer at Citigroup Inc.’s alternative investments unit. The NEC, which was created by Clinton, is designed to coordinate economic policymaking.
Peter Orszag, the head of the Congressional Budget Office, has been offered Lew’s old job as head of the White House Office of Management and Budget, a congressional aide and a party official said earlier this week.
GEITHNER’S NEW ROLE AS TREASURY SECRETARY
The next Treasury secretary will have unprecedented powers, in charge of overseeing a $700 billion rescue program that was enacted last month and designed to prevent a financial collapse. Paulson has allocated $250 billion to buying stakes in banks, and used another $40 billion for AIG.
Geithner would also inherit a record budget deficit. The bond dealers that advise the Treasury this month forecast a $988 billion shortfall for the financial year ending in September 2009. Paulson this week said the government will issue $1.5 trillion of debt.