Tracking the transition: Geithner to head Treasury


NBC News today reported that Timothy Geithner, president of the Federal Reserve Bank of New York, will likely be Barack Obama’s Treasury Secretary. Along with current Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, Geithner has been a central figure in formulating the government’s response to the recent economic turmoil.

The choice of Geithner may have boosted confidence on Wall Street. In the last hour of trading, stocks shot up and the Dow Jones Industrial Average was up nearly 500 points at its close.

The Washington Post has this to say about Geithner:

Geithner, who is 47, is most closely aligned with Clinton-era economics, having previously worked at Treasury under Clinton secretaries Bob Rubin and Larry Summers.

But he is thought of as an economic centrist. […] Prior to Treasury, Geithner worked at the IMF and with Henry Kissinger at his consulting firm.

And here’s an excellent Post piece describing how Geithner’s partnership with Paulson and Bernanke developed, and how the three men make on-the-fly decisions that affect the entire world’s economy.

As the financial crisis began in August 2007, the phone calls became more frequent — often quick, and unplanned. The three developed a Socratic style; one man would present an idea, and the others would challenge it, consider its flaws and ultimately find ways to tweak it.

Within the fraternity, the man who takes the lead depends on which agency is primarily responsible for the matter at hand.

When Geithner engineered the rescue of failing investment bank Bear Stearns in the middle of a cold March night, he had Paulson and Bernanke on the phone to get their input and blessing.

Paulson took the lead on the government takeover of Fannie Mae and Freddie Mac, but Bernanke advised him closely, and Geithner played a supporting role in calculating the impact on the financial markets.

Obama is expected to formally announce Geithner’s nomination Monday. NBC is reporting that Obama also will probably name New Mexico Governor Bill Richardson as Commerce secretary. And the New York Times reported today that Sen. Hillary Clinton, D-N.Y., will accept Obama’s offer to be secretary of state.


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  1. Pingback: Fedline » Obama unveils his economic team

  2. I think Greenspan is getting senile, today he said that you can stop asset bubbles by increasing capital requirements. That just increases the cost of credit. The next time you have a real estate bubble, you’ll have the same problem, assuming that banks are still in the business of loaning against real estate. If you want to stop this problem, then eliminate the federal subsidies for real estate development and investment, then require people in that industry to put their own money at risk instead of someone elses. If Greenspan really wants to change the banking system, though, then simply ban 95% and 90% LTV loans. Require a bigger equity cushion. BTW, the “too big to fail” argument is a fallacious one. During the Great Depression, Canada had no bank failures. The reason was that their banks were very large. The banks closed branches, etc., but none of them failed. By contrast, the US was dominated by thousands of very small banks, and we had more than 10,000 of them fail. So there is nothing inherently unsafe about a banking system dominated by large banks. The real problem with large banks is that during good times, they don’t provide enough competition for each other.

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