CHICAGO — U.S. president-elect Barack Obama selected a Mr. Defense and a Mr. Offense for his economic team Monday, picking Timothy Geithner as Secretary of the Treasury and Lawrence Summers as director of the National Economic Council.
“We do not have a minute to waste,” Obama said in his comments to a nationally televised audience. “Right now our economy is trapped in a vicious cycle.”
The dual selection set up a formidable tag team to take on the global financial crisis. Geithner at Treasury will likely take a defensive role, spearheading the remainder of the $700 billion Troubled Assets Relief Program and decisions to bail out individual financial institutions.
Inside the White House, Summers will be the architect of the administration’s economic stimulus proposals, including what is shaping up to be a multi-hundred billion dollar jobs and infrastructure spending plan.
“Vice President-elect Biden and I have assembled an economic team with the vision and expertise to stabilize our economy, create jobs, and get America back on track,” said Obama. “Even as we face great economic challenges, we know that great opportunity is at hand – if we act swiftly and boldly.”
On the steps of the Treasury Department earlier Monday, outgoing president George W. Bush signaled that he’s working closely with the incoming Obama team.
“I told the President-elect when I first met him, that anytime we were to make a big decision during this transition, he will be informed, as will his team,” Bush said.
Geithner has already been steeped in the bailout efforts made by Treasury Secretary Hank Paulson and the Bush Administration. As recently as last week, he was intimately involved in the negotiations to shape a bailout of Citigroup, which saw a dramatic 60 percent decline in its stock value in recent days, spurring fears that the massive financial institution could collapse and drag the rest of the economy along with it.
Although his career has been dominated by government rather than private-sector posts, Geithner’s role at the New York Fed has put him on the front lines of the economic meltdown. The New York Fed conducts open market operations, buying and selling US Treasury securities, which has given him a first-hand view of the panic in the financial markets as investors flocked to the relatively safe Treasuries this fall.
Summers served as Secretary of the Treasury under President Bill Clinton, where he famously used United States budget surpluses to buy down the federal debt for the first time since the 1920s. Taking office inside the White House next year, Summers will face a harshly altered economic universe in the midst of the worst financial crisis since the Great Depression.
Landing a job on the White House staff instead of a Cabinet level appointment means that Summers will avoid a possibly contentious Senate confirmation hearing that could dredge up questions over controversial comments he made in 2005 about gender differences while he was president of Harvard University. Women’s groups circulated complaints about Summers, and the issue could have been a distraction for an already strapped Obama economic team.
Still, Summers has a reputation as a masterful economist and, as a protégéof Robert Rubin, his predecessor as Treasury Secretary, the selection of Summers signals a strong centrist orientation of the Obama team. Summers was an early and aggressive supporter of economic stimulus to stave off recession, indicating a likely emphasis of the Obama team on aggressive government intervention in the markets.
“Summers will be the power behind the throne on fiscal policy,” said Greg Valliere, chief political strategist at Stanford Financial Group. “I think it’s going to be a pretty good division of labor.”
The Obama plan to spend billions of additional taxpayer dollars in a stimulus package that includes significant new spending on infrastructure is winning cautious approval from Wall Street observers, mainly because it will create jobs in America.
“You can’t import a bridge from China; it has to be built in America with American workers,” said Joe Lieber, senior vice president of Washington Analysis, a financial consulting firm.
“You’re probably going to see Wall Street react favorably to this stimulus proposal.”
Inside the Hilton Chicago hotel, President-elect Obama stood at a wooden podium bearing the sign “The office of the President Elect.” Eight American flags were affixed in the background.
Obama’s economic team entered the room first, followed by Vice President-elect Joe Biden, and, lastly, Obama. The president-elect delivered prepared remarks then took questions from reporters.
Obama cited Geithner’s experience with the financial markets, particularly global ones. “The reality is that the economic crisis we face is no longer just an American crisis, it is a global crisis,” Obama said.
He praised Summers as “a thought leader,” saying his intellect and experience will help shape his administration’s economic policy.
Obama said his team will be coming up with a stimulus plan, more details of which Obama said he will outline to Congress and to the nation in coming weeks. And sounding a grim note, Obama said, “We have to do whatever is required to keep the financial system working.”
But showing that the president-elect can maintain a sense of humor even in the face of the brutal economic reality, reporters’ seats at the news conference were divided into a White Sox section - to the South - and a Cubs section - to the North of the ballroom. Obama is a rabid White Sox fan. (For what it’s worth, Politico was in the Cubs section. We’re not sure what that means).
Reporters began setting up before 7 a.m. for the 11 p.m. news conference. There were about 150 members of the news media in the main room and additional press in an overflow room outside the Continental Ballroom C, where Obama spoke.
Obama and Biden also named Christina Romer Chair of the Council of Economic advisors, and named Melody Barnes and Heather Higginbottom to serve as Director and Deputy Director of the Domestic Policy Council.