WASHINGTON (Reuters) - Timothy Geithner was on every short-list to take over the U.S. Treasury Department for the singular reason that he has been involved in virtually all major efforts to restore stability to shaky financial markets.
Still a youthful 47 years of age, Geithner has played a pivotal role from his perch as president of the Federal Reserve Bank of New York in a series of dramatic financial rescues, including the central bank’s decision to help finance the takeover of Bear Stearns & Co in March.
U.S. markets rose sharply on Friday when media reported that President-elect Barack Obama appeared poised to nominate Geithner to be the next Treasury secretary.
Obama transition officials on Saturday confirmed the choice, putting Geithner in one of the pivotal seats in the new administration due take office on January 20.
An official announcement of the appointment, which requires Senate confirmation, is due on Monday.
Geithner’s unusually early selection, which was greeted enthusiastically by investors, heightens chances that he can manage a relatively seamless takeover from current Treasury chief Henry Paulson with the economy headed into a recessionary tailspin.
Geithner is no stranger to Treasury. He joined the department in 1988 and worked his way up to under secretary for international affairs from 1998 to 2001 under former Treasury secretaries Robert Rubin and Lawrence Summers during the Clinton administration.
After stints at the Council on Foreign Relations and the International Monetary Fund, Geithner was named president of the New York Fed in November 2003.
As the head of the New York Fed, Geithner has served as vice chairman and a permanent voting member of the U.S. central bank’s policy-setting committee. The other 11 regional Fed bank chiefs only get to vote on interest rates on a rotating basis.
Geithner’s profile was already well-established in Washington and on Wall Street, but it shot higher this year as the Fed and Treasury scrambled to avert a full-blown U.S. financial meltdown as reckless U.S. subprime mortgage lending metastasized into a global crisis.
He was involved closely, along with Fed Chairman Ben Bernanke and Paulson, in negotiations at the New York Fed that led to JPMorgan Chase & Co. getting a Fed loan to help it take over Bear Stearns in March.
Then there were the failed efforts to find a buyer for Lehman Brothers, which eventually declared bankruptcy, an event many believe deepened the troubling stresses in financial markets.
Geithner’s hand was also in multiple initiatives by the U.S. central bank to set up new emergency programs to pump cash into the banking system and keep the money spigot open for needy financial firms to try to induce them to lend normally.
Taken together, the Fed and Treasury’s actions represent one of the most significant interventions that has ever occurred in U.S. free enterprise. Geithner has said the weaknesses that have been exposed must be dealt with swiftly.
In testimony before Congress in July, he said it was vital that the United States consolidates supervision of U.S. financial institutions, which is currently shared among multiple agencies.
Here he said the Fed should take the lead “because you will not have good judgments made by this central bank, this Federal Reserve, in the future unless we have the direct knowledge that comes with supervision.”
Geithner breaks the mold for recent Treasury chiefs in some senses, since he has neither worked directly on Wall Street nor headed a corporation, but that might be seen positively in a climate where overhaul of the financial regulatory architecture is widely seen as top priority for a new administration.
On the plus side, he brings negotiating skills dating from his days as Treasury’s international point person during a tempestuous period that included the Asian financial crisis in the late 1990s. There has been ample opportunity to freshen those skills this year.
A New York native, Geithner has an undergraduate degree in government and Asian studies from Dartmouth College and a graduate degree in international economics from Johns Hopkins University. He has studied Japanese and Chinese, and lived in East Africa, India, Thailand, China, and Japan.
Reporting by Glenn Somerville