On Friday afternoon, the markets shot up nearly 7 percent following the news that President-elect Obama was poised to name Timothy Geithner, president of the New York Federal Reserve, as the next treasury secretary. Why was this leak worth several hundred billion dollars in market capitalization?
After all, our next treasury secretary won't be a guy who made a fortune on Wall Street (like Robert Rubin or Henry Paulson), or who served as CEO of a Fortune 500 company (like Paul O'Neill or John Snow), or who's been a distinguished economist (like Larry Summers), or who held high elective office (like Lloyd Bentsen). Rather, Geithner has been an extremely effective meritocratic bureaucrat for 20 years—a sort of community organizer for the financial world.
At a time when the private-sector leadership, and Wall Street's leadership in particular, has done a collective pratfall, it was unlikely the treasury secretary would hail from a prominent private-sector company. Early speculation, which began on the eve of the election, centered on Larry Summers, the voluble, brilliant Clinton-era treasury secretary, and Geithner, his one-time deputy. (Jacob Weisberg made the case for Summers last week. And I will take this opportunity to note one of my few accurate prognostications of this, or any other, millennium: On Nov. 5, I predicted it would be Geithner.)
Geithner has a great deal in common with Obama. They're almost exactly the same age. (Both were born in August 1961.) They're both products of elite East Coast universities: Geithner was a Dartmouth undergrad and has a master's degree from Johns Hopkins. Like Obama, Geithner is a citizen of the world. He spent a chunk of his childhood in Asia. (He has "lived in East Africa, India, Thailand, China, and Japan," his résumé notes.) Both are skinny, fit, high-energy guys with two children. And like Obama, Geithner sometimes appears mismatched to the majesty of his surroundings. Geithner has a quick laugh, a sense of irony, and bounces in and out of rooms at the sedate New York Federal Reserve, a grand fortress in Lower Manhattan.
One key difference: While Obama abandoned community organizing for politics early on, Geither has stuck with it. Of course, the community Geithner has been trying to organize—with limited success—is the international and domestic financial community.
Geithner worked his way up the ladder in the Treasury Department. As a junior member of the Committee To Save the World in the 1990s, he worked long nights alongside Treasury Secretaries Robert Rubin and Summers to douse the economic forest fires that arose in Mexico, Asia, and Russia. After a brief sojourn at the International Monetary Fund, in 2003 he was an unexpected choice for president of the New York Federal Reserve. (Unlike most of his predecessors in that post, he lacks a Ph.D. in economics.) For the last several years, he's functioned as a sort of den mother for Wall Street. The New York Fed, acting as the agent of the central bank, provides liquidity and succor to financial systems and helps organize aid when a community member fails. Geithner has played a crucial behind-the-scenes role in the bailouts (and, in the case of Lehman Bros., the nonbailouts). As the eyes, ears, and operating arm of the nation's central bank in New York, he knows all the key players. Geithner has a great appreciation for the sensitivities and workings of capital markets.
Geithner, whom I've met briefly, is a creature of the establishment. But he manages to be an establishmentarian without exhibiting self-importance and arrogance. To a degree, then, he's the un-Summers. And while previous treasury secretaries drawn from Wall Street may have called their colleagues for updates on business conditions, Geithner relies as much on charts drawn from a Bloomberg machine. Which makes him, to a degree, the un-Paulson.
So far, Geithner has been a valuable behind-the-scenes team member. Now he's been hired to be a leader. Is he worth several hundred billion dollars? We'll find out soon.