Treasury Pick Is Obama’s Pivotal Choice for New Term

Treasury Pick Is Obama’s Pivotal Decision at Start of Term Two
Treasury Secretary Timothy Geithner in Washington. Photographer: Andrew Harrer/Bloomberg

President Barack Obama, newly re-elected, now confronts two questions that he has been avoiding for more than a year: Who will replace Treasury Secretary Tim Geithner and when.

Obama’s decision, probably among the first personnel moves he makes, may set in motion a revamping of his economic and national security team, according to four current and two former administration officials who asked for anonymity and spoke before the outcome of the election was clear. Some advisers will depart and others will take on jobs that are opened up.

“The first thing is Treasury,” said former White House Chief of Staff Bill Daley. “You kind of have to figure out that one before everything else.”

After becoming only the second president since World War II to win re-election with the unemployment rate above 6 percent, Obama will be shuffling his Cabinet and senior staff while negotiating with Congress to avoid $607 billion in automatic tax increases and spending cuts that threaten to stunt U.S. economic growth.

In addition to replacing Geithner, Obama faces the departure of Secretary of State Hillary Clinton, who has said she isn’t planning to serve in a second Obama term.

Looming Vacancies

Defense Secretary Leon Panetta, the oldest Cabinet member at 74, hasn’t indicated if he’ll stay on.

“The secretary is focused on a job that he enjoys,” Pentagon spokesman George Little said. “He is focused on the department’s mission, not on his personal future.”

U.S. Trade Representative Ron Kirk has said he doesn’t intend to serve in a second Obama administration.

“I miss my house, I miss my family, I want to drive my car,” Kirk said after speaking at a conference in Washington on Sept. 19. “And I’d like to go make a little money.”

The Commerce Department is headed by an acting secretary, Rebecca Blank, an economist who took the agency’s helm when her boss, John Bryson, resigned in June for health reasons following a seizure.

In a second term, Obama may look to the private sector to fill the commerce job. One possibility: Steve Case, co-founder of America Online Inc., chairman of investment company Revolution LLC and a member of the president’s jobs council. Obama may pick from other members of his advisory panels, whose members include the chief executives of General Electric Co., Boeing Co. and Xerox Corp.

Senate Confirmation

Many of the positions that will have to be filled are subject to Senate confirmation.

Amid his re-election campaign, Obama hasn’t been focused on personnel decisions and many of his senior aides said they haven’t discussed with him his plans for the second term.

The timing of Geithner’s replacement depends on whether the White House can reach an agreement with the lame duck Congress on a deficit reduction plan to avoid triggering spending cuts and tax increases known as the fiscal cliff. If a deal can be reached before the Jan. 1 deadline, Geithner might leave as soon as it is completed.

If the solution is left for the next Congress, Obama may ask Geithner to stay, either to work on a deal or to reassure financial markets about the U.S. government’s ability to trim the deficit.

Fiscal Deal

“If they get a deal, he’ll stay until early January,” Daley said. “If they don’t get a deal, they have to wait until they have someone announced and probably confirmed.”

Once Obama settles on a new Treasury secretary, other jobs, including chief of staff, National Economic Council director and Office of Management and Budget director, can be filled, said the four current officials.

One of the top potential candidates for the Treasury job is White House Chief of Staff Jack Lew, the officials said.

A onetime aide to former U.S. House Speaker Tip O’Neill, Lew served as OMB director for Obama and former President Bill Clinton. He would bring a deep understanding of the tax and spending issues that could be at the center of the administration’s negotiations with Congress in a second term. He also has relationships with key congressional leaders and Obama’s trust, according to the officials.

Treasury Contender

Another possible contender is Erskine Bowles, who served as Clinton’s chief of staff and was co-chairman of a bipartisan panel formed by Obama that drafted a plan to cut the deficit, the officials said.

“Erskine has plenty of experience, not only in government but in business,” said John Mack, the former chief executive officer at Morgan Stanley. “The next Treasury secretary has to have experience in the global economy.”

Bowles, though, rankled some White House aides by criticizing the president for not embracing his blueprint, the officials said.

Lew and Bowles declined to comment for this story.

If Obama doesn’t pick Lew for Treasury, Lew may return to New York, where he worked for Citigroup Inc.’s Alternative Investments before joining the administration, two of the officials said. Either scenario would leave a vacancy at the chief of staff job at the White House.

The chief of staff is the president’s gatekeeper and a pivotal White House position.

Chief of Staff

Contenders for the chief of staff job would include Mike Froman, a deputy national economic adviser and Harvard Law classmate of Obama’s; Ron Klain, a former chief of staff to Vice President Joe Biden; Denis McDonough, Obama’s deputy national security adviser and campaign loyalist; and Tom Nides, the deputy secretary of state and a former chief operating officer at Morgan Stanley. Froman also may be a candidate to succeed Kirk. All four declined to comment for this story.

At OMB, Jeff Zients, the current acting director, may be in line for secretary of commerce, said two of the officials. Rob Nabors, a former deputy at OMB, would be a candidate to replace Zients.

The leading candidates to succeed Clinton as secretary of state may be Massachusetts Senator John Kerry and United Nations Ambassador Susan Rice, according to the four officials. Tom Donilon, Obama’s national security adviser is a long-shot choice, they said.

State Department

Rice was a finalist for the World Bank presidency last spring. Obama picked then-Dartmouth College President Jim Yong Kim, keeping Rice available for other positions in his second term, officials said. Her chances of confirmation may be hurt by her remarks about the deadly attack on the U.S. consulate in Benghazi, Libya, which Republicans have criticized as part of an administration campaign of deception surrounding the incident.

Kerry’s chances may be hurt by the election of fellow Democrat Elizabeth Warren to the U.S. Senate from Massachusetts yesterday. The Republican she defeated, Scott Brown, would have an advantage in a special election if Kerry resigned from the Senate, possibly costing the Democrats a seat.

Agriculture Secretary Tom Vilsack, who said in September “I love my job” in response to a question about his second-term plans, will probably stay, said Mark McMinimy, an analyst at Guggenheim Washington Research Group in Washington.

Other than a 2010 dustup over the firing of employee Shirley Sherrod over alleged racist comments that were found to be taken out of context, the USDA has been free of any scandal or controversy that would prompt a change, McMinimy said.

Interior Deputy

Neither Ken Salazar, the current Interior Secretary, nor Lisa Jackson, the administrator of the Environmental Protection Agency, has said if they would like to stay for a second Obama administration. If Salazar departs, his top deputy, David Hayes, may take over.

For the EPA, if Jackson leaves, possible successors include one of her top deputies, Bob Perciasepe or Gina McCarthy, or a state regulator such as Mary Nichols, chairman of the California Air Resources Board, or Kathleen McGinty, former head of the Pennsylvania Department of Environmental Protection.

U.S. Labor Secretary Hilda Solis is likely to stay on in Obama’s second term, according to Gary Chaison, a labor professor at Clark University in Worcester, Massachusetts.

“Obama would be more concerned with keeping on a Hispanic woman in the cabinet,” Chaison said in an interview. “Her background is one that would lead to almost automatic support. I don’t really see any change there if she wants to stay on.”

The same would hold for appointed members of the National Labor Relations Board, he said.

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