Obama moves to pick Geithner for Treasury

By Jeff Mason and Caren Bohan

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.