Timothy Geithner has said that he’ll step down as Treasury Secretary at the end of Obama’s first term. Assuming that Mitt Romney keeps self-destructing and Obama wins a second term, who should succeed him?
Just as Obama’s choice in 2008 of an economic team led by Larry Summers and Tim Geithner told you a lot about what kind of president he’d be (and not be), Obama will signal a lot in his selection of Geithner’s replacement.
In an economic crisis, the treasury secretary (tied with the Fed chairman) becomes the most important domestic public official after the president. Two huge and interconnected issues will face the next secretary: what to do about the still dysfunctional and largely unreformed banking system; and how to deal with the elite clamor for deficit reduction uber alles.
Obama, by rejecting the counsel of officials such as Paul Volcker and Sheila Bair, has already made clear that he is not interested in a drastic reform of the financial system. Dodd-Frank keeps getting nibbled to death by financial industry success in watering down its impact via weakened regulations.
On the deficit-reduction front, Obama has tacked back and forth, sometimes emphasizing the need for jobs and recovery now and deficit reduction when strong growth returns; and other times he has veered in the direction of the Bowles-Simpson austerity crusade, a demon partly of Obama’s own making.
Ideally, a treasury secretary would be tougher than Geithner in following through on financial reform, and would emphasize jobs and recovery over premature economic contraction via deficit reduction. Are there any plausible candidates who meet those criteria?
Alas, the likely list ranges from “could be worse” to dismal to too-progressive to be appointed. For starters, conventional wisdom holds that a treasury secretary needs to be credible to financial markets. This usually dictates someone who comes from Wall Street. Geithner came from the New York Fed, which is close to a wholly owned subsidiary. Others who know enough to do the job are either regulators or other career public officials, turncoats who spent time on Wall Street, academics with practical knowledge, central bankers, and other business CEOs.
Here are some people who might be taken seriously. I hope my comments don’t spoil it for the relative good guys.
