Treasury Secretary Henry Paulson has said he will leave his post in 2009, implying that he will exit Washington as soon as President-elect Barack Obama takes office in January.
Who will fill his shoes? The once-sleepy job at Treasury took on a vital urgency as the credit market began to seize up in September. The $700 billion bailout has just now started to be disbursed, and the real work of unsticking global credit markets is still ahead.
The bigger question of how to regulate a greatly diminished Wall Street will figure prominently on any incoming Secretary’s agenda, as well as helping the Federal Reserve, Congress, and President Obama guide the country through what promises to be a long, difficult recession.
Here, then, is the shortlist of candidates so far, according to beltway and financial news chatter to date:
Larry Summers, the former Harvard president, was Bill Clinton’s Treasury Secretary in the last 18 months of Clinton’s second term. A former World Bank chief economist, Summers is a strong pick on experience, although interestingly he is credited with helping to ensure the viability of the derivatives market. It was these instruments that later imploded and accelerated the housing collapse into a worldwide recession, just now under way.
Tim Geithner is currently in charge of the New York Fed and serves on the interest-rate setting Federal Open Market Committee. He served in 1999 as Under Secretary of the Treasury for International Affairs and worked for both former Treasury Secretaries Larry Summers and Robert Rubin. Geithner would create a strong nexus between the Fed and Treasury as the credit crisis winds down and the recession kicks in.
New Jersey Gov. Jon Corzine, a former senator, is an alumnus of Goldman Sachs, like current Treasury Secretary Paulson. Although a liberal, politically, he would bring the cachet — and, of course, the tarnish — of having run a major Wall Street firm. A native of Illinois, Obama’s home state as a senator, Corzine is a logical pick on a number of fronts. He has denied so far having conversations with Obama about the job.
A dark horse, thanks to his senior role at Citigroup as the credit crisis roared, Robert Rubin is a former Secretary of the Treasury from Clinton’s first and second terms. An Obama adviser, Rubin nevertheless carries the taint of having fought regulation of derivatives. Look for Rubin to play a role in picking the next Treasury head, but it will be harder to defend him as the choice for the top spot.
Paul Volcker is another old hand, having run the Federal Reserve under former presidents Carter and Reagan. He also is an Obama advisor, but more importantly Volcker helped stave off disaster during the Reagan years by raising interest rates high enough, long enough to slay inflation, setting the stage for later prosperity under Reagan. If commodities bull Jim Rogers has it right, inflation will a huge factor for Obama. Volcker has seen all this before as Fed chief.
Billionaire investor and Obama adviser Warren Buffett needs no introduction, and he is hardly likely to accept a political job beyond the advisory role he has carved out either behind closed doors or through the press. But if he ever wanted to put his money where his mouth is in terms of advice, now would be the time.
The head of the Federal Deposit Insurance Corporation (FDIC), Bair has been front and center on the credit crisis and has managed well the rising tide of bank closings. Not as politically connected nor a Wall Street heavy, Bair has nonetheless floated into the pool of possible new Treasury chiefs.
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