Reported pick for Treasury stirs Wall Street

WASHINGTON — New York Federal Reserve Bank President Timothy Geithner is expected to be President-elect Obama's choice to head the Treasury Department. Reports of his selection sent stocks soaring at the close of trading Friday.

The anticipated nomination, which the financial cable channel CNBC and The Wall Street Journal reported shortly before the New York Stock Exchange's closing bell, sent the Dow Jones industrial average up 494 points, or 6.5 percent, in the final hour of trading after two days of steep declines.

Obama's transition team and the Federal Reserve declined to confirm that Geithner had been offered and accepted the post, but neither made an attempt to knock down the reports. Obama is expected to announce his selection of Geithner, and perhaps other economic advisers, Monday.

The news was greeted with support from across the political and ideological spectrum.

"He's smart and levelheaded," said Alice Rivlin, a Democrat and former vice chairwoman of the Federal Reserve Board. "His involvement in the crisis ... is a very important qualification."

"It's a terrific choice," said Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, a conservative think tank. "He's been in the middle of this, he has been at Treasury, and he's a very bright guy, highly respected by people in both parties."

In picking Geithner, Obama passed over Lawrence Summers, the Treasury secretary in the final years of the Clinton administration. But the president-elect is likely to name Summers, a highly regarded economist and a former president of Harvard University, as a senior White House adviser, people involved with the Obama transition said.

With Congress leaving town this week having done little to address the deteriorating economy and President Bush exhibiting no desire for additional steps, Obama is under increasing pressure to signal his intentions and flesh out the team he will rely on to deal with a crisis that spans teetering financial institutions, automakers struggling to survive, evaporating consumer confidence and the prospect of deflation.

People close to Obama said he clicked with Geithner during a recent private meeting. The two men are the same age, 47, and Obama is closer temperamentally to the low-key Geithner than to the more tightly wound Summers.

Summers, 53, is universally described as brilliant but also is renowned for being arrogant, occasionally rude and sometimes difficult to work with. As a special White House adviser to Obama, however, he could have influence rivaling that of the Treasury secretary.

That would be doubly true if he is viewed as the nation's next central banker. Two Obama advisers said Summers would be the leading candidate to become the next Fed chairman should Obama choose not to reappoint Ben Bernanke when his term ends in January 2010.

As head of the New York Fed, Geithner is the central bank's eyes and ears on Wall Street. Along with current Treasury Secretary Henry Paulson and Bernanke, Geithner has come under criticism for the original construction of the $700 billion bailout plan, which has had to be overhauled and has failed to eradicate the credit crunch at the heart of the financial crisis.

But his association with the current administration's policies is balanced by his close connections to the centrist Democratic policies of former President Clinton and his best-known Treasury secretary, Robert Rubin. Geithner served under Rubin and Summers at the Treasury Department in the 1990s and rose to be undersecretary for international affairs.

Throughout the crisis, Geithner consistently has pushed for aggressive government intervention in companies' troubles.

Working closely with Bernanke, Geithner early this year engineered the $30 billion bailout of Bear Stearns.

Since September, the two men and Paulson have steered the government takeover of mortgage giants Fannie Mae and Freddie Mac, bailouts of American International Group and a number of financial institutions, and the design of the $700 billion bailout program that Bush and Congress approved this fall.

As such, Geithner also has had a part in some high-profile missteps, including the government's decision to allow Lehman Brothers to fail; some experts said that destabilized financial markets and helped to spread the financial contagion globally.

Compiled from The New York Times, McClatchy Newspapers

and the Los Angeles Times.