WASHINGTON — Virtually unknown outside financial circles, Timothy Geithner suddenly is the man at every crisis point in the economy.
As Barack Obama's pick to be Treasury Secretary, Mr. Geithner is serving as a chief economic adviser to the president-elect and will shape the new administration's strategy to cure the country's deep economic woes. But he already is helping lead the battle at the Federal Reserve – and with the Bush administration – to rescue the nation from the worst financial conflagration since the 1930s.
Mr. Geithner is a man wearing different hats.
He straddles the administrations of two presidents and intervenes in the economy on behalf of both. Through Mr. Geithner, Mr. Obama has a historically unique opportunity to make an imprint even before he is president.
Timothy Geithner, left, and Federal Reserve Chairman Ben Bernanke chat in mid-October at the Economic Club of New York (Lucas Jackson/Reuters)
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Still, Mr. Geithner must tread gingerly.
“He needs to be careful and gauge his response,” said Anthony Sabino, a professor of law and business at St. John's University. “He needs to be hands-on between now and the end of the Bush administration. But he can't squeeze. He needs to be involved, but he can't push too hard. It is a nuanced dance.”
With the country believed to be sinking ever deeper into recession, Mr. Obama isn't wasting any time during the transition. He has assembled his economic team – led by Mr. Geithner – and is already working on crafting economic initiatives that some Democrats estimate at $500-billion to $700-billion (U.S.) to send to Congress in January.
As president of the Federal Reserve Bank of New York, Mr. Geithner has taken an activist, interventionist approach to battling the financial crisis. He supported the Fed's decision to financially back JPMorgan Chase & Co.'s takeover of teetering Bear Stearns Cos. Inc. He helped engineer a potential rescue of Lehman Brothers Inc., although the efforts didn't gel and the company was forced into bankruptcy. He also was involved in the government's bailout of insurer American International Group Inc. and Sunday's rescue of Citigroup Inc.
And he has figured prominently in the creation of a raft of innovative new programs to get banks to lend more freely, a crucial effort to break the nation's debilitating credit clog. One day after Mr. Geithner was tapped to be Mr. Obama's Treasury Secretary, the Fed announced two new programs to provide $800-billion toward unlocking lending.
Some people caution against interpreting Mr. Geithner's selection as meaning Mr. Obama endorses those steps.
Yet in choosing him, Mr. Obama “was making a judgment that it is better to have continuity than it is to get a fresh start,” said Anil Kashyap, professor of economics and finance at the University of Chicago's Graduate School of Business. “But continuity comes with some baggage.”
Treasury Secretary Henry Paulson spoke on Tuesday of his close relationship with Mr. Geithner in devising the new $800-billion program, the Citigroup rescue and other efforts.
“We've worked as a team. He was working right with us all weekend,” Mr. Paulson said. “That's his job. … This is an important part of what we do.”
Mr. Paulson said it is especially crucial to have a seamless transition between the old and new administrations given the country's fragile economic and financial state.
“We will discuss with them very, very carefully any programs we are developing and any programs that we implement,” Mr. Paulson said. “It's very important that the next team understand anything we have in place and be able to carry them out effectively. Tim is very well positioned for that because he understands everything we have in place and helped to put it in place.”
One of the most pressing decisions Mr. Geithner will face early on is deciding how to spend the next $350-billion instalment of the $700-billion financial bailout package overseen by Treasury.
Will he carry on Mr. Paulson's main focus of injecting cash into companies to relieve credit problems or will he revive efforts to buy rotten mortgages and other toxic assets from financial institutions?
Mr. Geithner has little time to ponder these weighty matters.
“Being president of the New York Fed right now is a 168-hour a week job,” said Kenneth Rogoff, an economics professor at Harvard University. “He's still president of the New York Fed and there's so much to do there, I don't think one can imagine he's shifted over to planning the transition. He can't. He has to stay in his current role.”
Some academics and financial experts believe Mr. Geithner will soon leave the Fed to give himself time to prepare and focus on his next job. Mr. Obama's transition folks say Mr. Geithner will recuse himself from Fed decisions on interest rates. Its next meeting is Dec. 16.
Many predict Mr. Geithner – widely expected to be confirmed by the Democratic Senate as Treasury Secretary – may push harder for new government interventions to ease financial stresses once he is in office. That's consistent with his activist approach.
“The whole transition issue is fascinating,” said Brian Sack, a former Federal Reserve economist now at Macroeconomic Advisers. “He is in the middle of that. It's a wonder how he managed to perform the job even wearing one hat.”
JEANNINE AVERSA AND ELLEN SIMON |
