As Barack Obama faces mounting pressure to announce his economic team, Democrats are split over two of the leading candidates for Treasury secretary: New York Federal Reserve Chairman Timothy Geithner and former Clinton Treasury Secretary Lawrence Summers.
The different camps give a glimpse of the tough choices Democrats faces as they confront the challenge of governing during a time of deep economic anxiety.
Other names being tossed around for the top economic post include former Federal Reserve Chairman Paul Volcker, former Clinton Deputy Treasury Secretary Roger Altman, Federal Deposit Insurance Corp. chairwoman Sheila Bair and Chicago venture capitalist David Vitale.
Economic insiders consider Summers and Geithner the most serious contenders. “I’ll fall out of my chair if it’s not one of the two,” said a former senior Treasury official.
The two top candidates have a long relationship. At Treasury during the Clinton years, Geithner often adjudicated disputes between Summers and Robert Rubin, who was Bill Clinton's first Treasury secretary.
On Friday, Obama is meeting with his transition economic advisory board, which includes Summers, Rubin, investment guru Warren Buffett, Michigan Gov. Jennifer Granholm and Google CEO Eric Schmidt. But campaign aides said Obama did not plan to announce his Treasury pick at the afternoon press conference that is scheduled to follow the meeting.
“They’re all qualified, that’s the good news, unlike if you look back at the Cabinet of this past president – not always the case,” said one Democratic member of Congress closely involved in financial issues, who seemed less-than-enthusiastic about Summers. “It’s going to be more just a fit, who fits on more levels. They’re all good, you can work with all of them.”
Summers, who is widely acknowledged to be seeking the top Treasury post, has a strong connection to the Obama team and a long history of government service. Obama economic aides said that Summers was one of ten advisers on a weekly conference call with the campaign over the past few months.
His experience, however, has a downside for a campaign that sold Americans on a message of change. In the Clinton administration, Summers was a major proponent of free trade, deregulation and free market-oriented policies, which have come under fire in recent months as the economy has spiraled downward.
But even former critics note that in the seven years since he’s left government, Summers has taken a more progressive stance on economic issues. In a regular Financial Times column, he’s pushed for greater financial regulation, restrictions on trade and closing the income gap.
“He didn’t understand that stuff five years ago, but he does now,” said a liberal economist and distant Obama adviser. “A lot of times you have the Greenspan problem, where you get to a point in your economic life and you can’t evolve even if the data tells you too.”
While Summers is widely acknowledged to be a brilliant economist, he carries a history of public relations dust-ups that stem from a prickly interpersonal style, according to friends and colleagues.
He was forced out as president of Harvard University after a series of statements that angered affirmative action proponents, environmentalists and feminist activists. The final straw was when he said that innate differences between men and women might be one reason fewer women succeed in science and math careers
While not a disqualifying factor, the incidents would certainly lead to some tough confirmation hearing questioning and could undermine the new administration’s judgment on critical personal.
“It’s hard to imagine the Obama administration wanting to have to devote the time necessary to sell the country on the idea of a guy who made himself famous at Harvard by suggesting that girl can’t do math,” said liberal MSNBC host Rachel Maddow.
Geithner, who like Obama is only 47 years old, has demonstrated ability to handle a crisis, said economists close the transition. And a confidante of Treasury Secretary Henry Paulson, Geithner been at the very center of the government’s fast-evolving response to the financial crisis, chairing meetings at his New York office.
He began sounding the alarm about risks associated with lacking federal oversight over complex financial products years before the current crisis. In 2005, at his urging, financial services companies established a national registry to help process and track their trades of credit derivatives, an insurance-like product bought by financial services companies to cover risky subprime mortgage investments.
A career civil servant, Geithner has a reputation for non-partisan work. At Treasury, he worked under Summers on international issues, taking a front seat during the Asian financial market melt-down in the late 1990s. And his international expertise could be an asset as the current economic crisis grows increasingly global.
But if Obama settles on Geithner, he’ll lose some control over another key economic post. The New York Federal Reserve Board would appoint Geithner’s successor, leaving the administration with an unknown negotiator on the front line of the financial crisis.
Whoever he picks, Obama is under pressure from key members of Congress and Wall Street to act soon.
“Six weeks ago, our economy teetered on the precipice of collapse,” Senate Banking Chairman Chris Dodd (D-Conn.) told reporters Thursday. “The new administration will have no more urgent priority in my view than putting a team of capable, experienced and qualified economic leaders swiftly in place.”