WASHINGTON -- President-elect Barack Obama on Friday selected the head of the Federal Reserve Bank of New York as his nominee for Treasury secretary, choosing a vigorous advocate of government intervention in the troubled economy who nonetheless commands wide respect among conservatives.
Timothy F. Geithner, 47, has been a central player in the Bush administration's response to the economic crisis, and his selection indicated the incoming administration's desire to hit the ground running.
News of the decision was seized on as a signal of reassurance, coming amid rising concern over a perceived leadership vacuum in the capital. Though panicky financial markets posted heavy losses several days this week, and Congress remains deadlocked over a bailout for Detroit automakers and a new economic stimulus package, the Bush administration has indicated it plans no new economic initiatives for the rest of 2008.
On Thursday, the Dow Jones Industrial Average plummeted to its lowest point since 2003, and the Standard & Poor's 500 Index fell back to its 1997 level. But word of Geithner's selection Friday helped lift the Dow. It closed up 494 points, or 6.5 percent, erasing Thursday's drop of nearly 450 points.
The appointment drew support from across the political and ideological spectrum.
"He's smart and levelheaded," said Alice M. 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, known as 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 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.
Born 14 days after Obama, Geithner would be one of the youngest Treasury secretaries in U.S. history.
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. Proponents of naming a team now said that Obama could show that they would have time to prepare for taking action as soon as he takes office Jan. 20, 2009.
"This is all about confidence. It's going to get worse. Fear is going to take over," said former General Electric Chief Executive Jack Welch 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."
Other likely members of Obama's economic team are New Mexico Gov. Bill Richardson as commerce secretary and Congressional Budget Office Director Peter R. Orszag as head of the White House Office of Management and Budget.
Before becoming head of the New York Fed in 2003, Geithner was an official with the International Monetary Fund. He spent 13 years at the Treasury Department, serving under three presidents, beginning in 1988. Geithner rose to undersecretary for international affairs, where he served under Rubin, then Summers, from 1999 until 2001.
Geithner's ascent began with a brief stint with 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.
But his big break came in the second half of the 1990s when, as an assistant financial attache at the U.S. Embassy in Tokyo, he wrote what was widely considered a brilliant analysis of the South Korean financial crisis.
The document drew the attention of both Rubin and Summers. They elevated the then-38 year-old Geithner to Treasury undersecretary for international affairs during the final years of the Clinton administration.
As president of the New York Fed, Geithner effectively has been the central bank's chief representative to Wall Street and the international financial community. As the financial crisis escalated over the past 15 months, he became one of the chief architects of the Fed's response.
In March, he helped orchestrate the shotgun marriage of investment house Bear Stearns Cos. to J.P. Morgan Chase & Co., a deal that required the Fed to take over the management and risk of nearly $30 billion of troubled assets. In September, he sought but failed to find a buyer for investment bank Lehman Brothers Holdings Co., paved the way for Bank of America's abrupt purchase of Merrill Lynch, and helped designed what amounts to a government takeover of insurance giant AIG.
This last deal was supposed to have involved the Fed lending the company $85 billion in return for a nearly 80 percent stake in the firm. But AIG's fortunes continued to sag, requiring a second and then a third financial arrangement that has now boosted Washington's commitment to the company to about $125 billion. Some outside observers had wondered whether problems with the AIG deal might sour Geithner's chances for the Treasury secretary's job.
Throughout the crisis, Geithner has consistently pushed for aggressive intervention in companies' troubles, and has forcefully defended the actions of Bernanke and Paulson, including in an exchange of speeches with former Fed chairman and Bernanke critic Volcker.
"The current episode has a basic dynamic in common with all past crises. As market participants have moved to reduce exposure to further losses, to step on the brake, the brake became the accelerator, amplifying the shock," Geithner said of the brewing financial crisis in March.
"The speed and agility with which public-policy makers and private financial institutions respond to the continuing pressures in a rapidly evolving environment will determine how quickly and how smoothly market conditions return to normal -- and how rapidly the risks to the economic outlook are mitigated."
Jan Hopkins, president of the Economic Club of New York, said Geithner has been "at the very center of the crisis."
"Every other player, whether banker or central banker or reporter, wants to talk with him," said Hopkins.
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