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Geithner To Become Treasury Secretary
Geithner has played major role in government's response to the credit crisis and is well-liked by the Senate.
November 21, 2008
WASHINGTON—President-elect Barack Obama is expected soon to name Timothy F. Geithner as the next Treasury Secretary, sources said Friday.
Geithner has been president of the Federal Reserve Bank of New York since 2003. He has been a key figure in the government's response to the credit crisis, helping make the decisions to save Bear Stearns in March and let Lehman Brothers fail in September.
Geithner has also been a strong advocate for an overhaul of the current regulatory system.
"What we have to do is find a better balance between market discipline and regulation, a better balance between efficiency and innovation and resiliency and stability," he told reporters April 12 during the International Monetary Fund's spring meeting. "I don't think anybody … can look at the system today and say we have that balance right. The challenge I think all of us face is trying to take a comprehensive look at the incentives we create for risk taking in the financial system and get those incentives better aligned."
He gained notice that month during testimony in front of the Senate Banking Committee on the government's decision to rescue Bear Stearns and sell it JPMorgan Chase.
While Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson also testified, Geithner's answers were seen as unusually direct. He said that not saving Bear could have led to major economic problems.
"A failure to act would add to the risk that Americans would face lower incomes, lower home values, higher borrowing costs for housing, education, other expenses, lower retirement savings, and rising unemployment," he said.
His performance will serve him in good stead during a Senate confirmation process, observers said.
"The Senate loves him. When testifying with Bernanke and Paulson, Geithner was the only one to give clear, direct answers," said Chris Low, the chief economist at First Horizon National Corp.'s FTN Financial Capital Markets.
But Geithner has also been criticized for the failure to save Lehman Brothers--a collapse that many say undermined the market's confidence in the financial system.
Bloomberg News
Timothy Geithner
Timothy McTaggart, a partner with the law firm Pepper Hamilton LLP and a former Treasury official, said some have also criticized Geithner as a "technocrat."
"But I think overall he has very high standing among staff that has worked with at the agencies, and members he's worked with on Capitol Hill," he said. "Given his perspective of being at Treasury and Fed he may be open to the Fed having additional tools beyond lending and maybe also shoring up Treasury's tools."
Wayne Abernathy, an executive vice president with the American Bankers Association and a former Treasury official, praised Geithner.
"I've worked with him in the past and he's very capable," he said. "He meets the second important test that he can reassure the markets immediately upon hearing the name."
Indeed, the Dow Jones Industrial Average shot up more than 500 points after rumors of Geithner's appointment surfaced.
Abernathy said that Geithner would be the first Treasury secretary in recent memory to have a direct understanding of the banking industry--of vital importance in the current environment.
"That would be the first time in a long, long, while that we have had a Treasury secretary with that kind of understanding," Abernathy said. "The banking industry is the core on which you are going to rebuild the economy."
Geithner has extensive experience in the financial services industry. He joined the Treasury Department in 1988, and has served as Treasury Undersecretary for International Affairs from 1999 to 2001.
He was director of the policy development and review department at the International Monetary Fund from 2001 to 2003.
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