Geithner Tells Obama He Will Remain as Treasury Secretary
Treasury Secretary Timothy F. Geithner, a central figure in the U.S. government’s bailouts of Wall Street banks and efforts to raise the debt limit, told President Barack Obama that he intends to remain in his job.
Geithner, 49, will stay on at least through the 2012 election, according to an administration official who was not authorized to comment publicly.
Geithner, the last remaining member of Obama’s original economic team, made his announcement after months of speculation over his future. He told White House officials this year that he was considering leaving once a deal to raise the nation’s borrowing limit deal was reached. Obama signed an increase in the limit on Aug. 2.
“Secretary Geithner has let the president know that he plans to stay on in his position at Treasury,” Jenni LeCompte, assistant secretary for public affairs, said in a statement today in Washington. “He looks forward to the important work ahead on the challenges facing our great country.”
Geithner’s decision allows the administration to maintain continuity in economic policy at a time of investor concern that the two-year-old expansion may be stalling and after Standard & Poor’s cut the U.S. credit rating for the first time. The S&P 500 Index of stocks slumped 7.2 percent to 1,199.38 last week, the biggest weekly drop since November 2008 and the lowest level since Nov. 30, 2010.
“The President asked Secretary Geithner to stay on at Treasury and welcomes his decision,” Jay Carney, the White House press secretary, said in a statement today.
“It is the right decision for him and the markets,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said in an e-mail today. “He has not finished the job yet as the economic recovery remains fragile and the trillion-dollar deficits have not been tamed. There is no obvious immediate replacement waiting in the wings.”
Banking lawyer H. Rodgin Cohen, senior chairman at Sullivan & Cromwell LLP, said in a phone interview today that Geithner’s decision is positive because it “removes numerous uncertainties overhanging the market.” Cohen described himself as an “unabashed fan” of Geithner’s.
The Treasury secretary’s challenges for the rest of Obama’s term include reducing unemployment, overhauling the housing- finance system, working with Congress to further cut the budget deficit and helping European leaders contain their debt crisis.
‘Middle of Crisis’
“In the middle of this crisis, Geithner probably doesn’t want to roil markets any more than they have already been, so it’s best to just say you’re staying for now even if you are ultimately planning on leaving,” Dan Greenhaus, chief global strategist at BTIG LLC in New York, said in an e-mail.
The Obama administration probably wanted to avoid a fight in the Senate, which would have to approve a new Treasury secretary, said Brian Gardner, senior vice president of Washington research at New York-based Keefe, Bruyette & Woods Inc.
“It would have been very tough to confirm a successor,” Gardner said.
Under Geithner, the U.S. has suffered what he referred to last month as “unacceptably high, terribly high” unemployment. The jobless rate fell to 9.1 percent from 9.2 percent in July as discouraged workers left the labor force, according to Labor Department data released Aug. 5.
Geithner may find himself in another round of debt-limit debates. The agreement reached in Congress requires that a group of 12 lawmakers submit savings in November involving all parts of government. Geithner also will be tackling the future of Fannie Mae and Freddie Mac, the housing-finance companies that have drawn about $130 billion in taxpayer support since they were seized by the government in 2008.
Overseas, Geithner must continue working with European leaders who are trying to manage the region’s debt crisis. Italy announced a plan to speed up financial reform on Aug. 5, and the European Commission called for an expansion of a $623 billion rescue fund.
After S&P downgraded the U.S. credit rating on Aug. 5, U.S. Senator Jim DeMint, a South Carolina Republican, wrote on his Twitter account that Obama should fire Geithner and “replace him with someone who will focus on balancing our budget and letting private sector create jobs.”
Republican presidential candidate Michele Bachmann of Minnesota also called on Obama to dismiss Geithner during an interview with Fox News after the ratings downgrade was announced.
As Treasury secretary since January 2009 and president of the Federal Reserve Bank of New York for more than five years before that, Geithner helped lead efforts to stabilize the financial system and pull the U.S. economy out of the worst recession since the Great Depression.
Bailouts of banks including Citigroup Inc. (C) and Bank of America Corp. (BAC) were criticized by lawmakers for benefiting the firms blamed for the crisis. At his January 2009 Senate confirmation hearing, Geithner said the rescue program “helped prevent financial catastrophe.”
After the economy began to recover, Geithner pushed for the Dodd-Frank financial overhaul and spoke frequently in the past several months in defense of the law, which has been criticized by some Republicans in Congress as hurting businesses.
White House Signal
Geithner had previously signaled to White House officials that he was considering leaving once the months-long debate over raising the $14.3 trillion federal debt limit was settled. The Senate gave final approval to the legislation on Aug. 2, the date the Treasury gave as the deadline for when the U.S. would exhaust its borrowing authority.
Geithner frequently warned lawmakers that failing to raise the limit could have “catastrophic” consequences for the U.S. economy and said “political theater” in Congress was delaying action.
In an interview with ABC television last week, Geithner said he hadn’t made a decision on when to leave the administration.
“We’ve got a lot of challenges, the president’s got a lot of challenges, and you know, I’ve got other pressures on me, too,” he said. “But I’ll make that decision at the right moment.”
Commuting From Washington
Geithner had previously said he would start commuting to Washington from New York because his son was returning there to finish high school.
Even after his efforts supporting Dodd-Frank and for raising the debt limit, Geithner is most closely identified with the 2008 financial crisis and the Troubled Asset Relief Program bailouts.
As president of the New York Fed in September 2008, Geithner -- along with Fed Chairman Ben S. Bernanke and then- Treasury Secretary Henry Paulson -- was among the key decision- makers juggling the bankruptcy of Lehman Brothers Holdings Inc. (LEHMQ), the near-collapse of American International Group Inc. (AIG), and talks for Bank of America to buy Merrill Lynch & Co.
Geithner defended the bailouts as necessary to saving the financial system.
“We can say with confidence today that the American financial system is in much stronger shape because of the actions we took, the strategy we embraced to resolve the crisis, but also because of the progress we made in implementing the basic foundations, the reforms in Dodd-Frank,” Geithner said July 18.
Critics, especially Republicans, argue that the bailouts and Dodd-Frank did little to reduce the possibility that the U.S. government will at some point be forced again to rescue financial institutions.
“He’s had a long career of embracing too-big-to-fail,” said Mark Calabria, director of financial regulation studies at the Cato Institute in Washington and a former aide to Alabama Senator Richard Shelby, the senior Republican on the Senate Banking Committee. “He’s done almost nothing to control the moral hazard created by the federal safety net.”
To contact the reporter on this story: Ian Katz in Washington at firstname.lastname@example.org
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