Obama moves to pick Geithner for Treasury

CHICAGO Fri Nov 21, 2008 6:08pm EST

1 of 5. (From left) Senator Hillary Clinton, New Mexico Governor Bill Richardson, and Timothy F. Geithner, President of the Federal Reserve Bank of New York, are seen in a combination file photo.

Credit: Reuters/From left Craig Mitchelldyer, Andrea Comas, Keith Bedford

CHICAGO (Reuters) - President-elect Barack Obama on Friday moved toward nominating Timothy Geithner as Treasury secretary and charging the respected head of the New York Federal Reserve with helping pull the United States out of an economic nosedive.

New York Sen. Hillary Clinton appeared headed to be nominated as Obama's secretary of state, bringing his one-time main Democratic rival into the fold in a pivotal role in his new administration.

Geithner, 47, had been seen as one of two main candidates for the Treasury job along with former Clinton administration Treasury chief Lawrence Summers.

U.S. stocks soared on the Geithner news, first reported by NBC News, pushing major indices up more than 6 percent. The Dow Jones industrial average closed above 8,000, an important psychological trading level.

Obama may consider Summers as a possible successor to Federal Reserve Chairman Ben Bernanke, whose term ends in January 2010, a Democratic source said.

Clinton, wife of former President Bill Clinton, appeared set to take the top U.S. diplomatic post after wrestling with whether she wanted to give up her Senate seat.

"We're still in discussions, which are very much on track. Any reports beyond that are premature," Clinton senior adviser Philippe Reines told Reuters.

The New York Times said it was a done deal. "She's ready," The Times quoted one of two Clinton associates who confirmed the deal as saying.

A senior Democrat told Reuters in Washington that Obama wanted Geithner for the Treasury job, but had yet to make an offer. He did confirm that Summers was no longer under consideration. "Summers is off the list," he said.

The New York Times reported that Obama was likely to name Summers as an economic adviser with the expectation that he will eventually be tapped for the Federal Reserve Board and perhaps as Bernanke's successor.

MARKET BOOST

Obama, who beat Republican John McCain in the November 4 election, takes over from George W. Bush on January 20. He has been largely hunkered down in Chicago since the election working on his administration team.

NBC News said Obama was expected to announce Geithner and other members of his economic team Monday in an effort to calm U.S. financial markets that have sunk like a stone all week before Friday's surge.

"A fantastic choice to help lead the financial markets out of the wilderness," said Chris Rupkey, senior economist at The Bank of Tokyo-Mitsubishi in New York, of Geithner. "A crisis manager par excellence who will hit the ground running as he has been on the case since the global funding crisis began way back in July 2007."

If confirmed by the U.S. Senate as Treasury secretary, Geithner would be at the helm of efforts to guide the country out of the financial crisis, which some analysts predict could lead to the worst economic downturn since the Great Depression.

NBC also said New Mexico Gov. Bill Richardson -- who was one of a crowded pack of Democratic presidential candidates early this year -- could get Obama's nod to become commerce secretary.

Richardson's elevation to the cabinet would give the Obama administration its first high-profile Hispanic member as its main liaison to the business community. Richardson was a United Nations ambassador and energy secretary under former President Bill Clinton.

NATIONAL SECURITY FRONTRUNNER

Obama's early moves got the thumbs up from the Senate's Republican leader, Mitch McConnell, who said he believed the Obama team was preparing to "govern in the middle and tackle big things."

"I think the new administration is off to a good start," he told reporters on Capitol Hill.

Democrats increased their majority in the Senate and U.S. House of Representatives in the November 4 vote.

Set to become the first black U.S. president, Obama will inherit a deeply unpopular war in Iraq and another war in Afghanistan, where violence has soared, and will seek to rebuild relationships with allies, particularly in Europe.

Retired Marine Gen. James Jones has emerged as a leading contender for White House national security adviser, according to Democratic sources. Jones is a former top operational commander of NATO.

Obama is also leaning toward keeping Defense Secretary Robert Gates. Gates, who replaced the combative Donald Rumsfeld in 2006, is praised by both Republicans and Democrats in Congress for overseeing a military strategy shift in Iraq that helped bring the country back from the brink of civil war.

(Editing by Kristin Roberts and Frances Kerry)

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