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Treasury Pick

Word that President-elect Barack Obama has finally selected a Treasury Secretary, New York Federal Reserve President Tim Geithner, sent the stock market climbing on Friday. The Wall Street Journal editors’ reaction? It’s about time. They wrote:

We take the market’s reaction as a strong sign of the price that was being paid in uncertainty over this choice and the direction of the incoming Administration’s economic policy. There could hardly be a clearer signal that addressing the immediate panic in the credit markets and its impact on the real economy is priority No. 1 for the new President and that all involved want to get the Obama show on the road.

.    .    .

Amid the brief market euphoria, it is hard not to notice the leaks and air of disorganization coming from the Obama transition team on these important appointment decisions. The new President may come to appreciate George W. Bush’s experience with lower-tier political players who put their own compulsions above his desire to govern.

The delay of nearly three weeks after the election in announcing his economic team has confused and befuddled observers, and contributed unneeded instability in the markets at the worse possible time. The reason for this peculiar roll out of cabinet positions (HSS before Treasury?) is unknown.

What of the choice itself? We know he is a trained technocrat, in the best sense of the word. He knows how to navigate in a crisis and he has in fact been front and center in this one. He understands financial instruments and the inner working of the Fed. But so did Hank Paulson, so that provides not as much comfort as it might have before the current meltdown. As for tax, trade, and spending policy, we know virtually nothing. He has virtually no private sector experience. All of that seems to please financial gurus and rattle some of the President-elect’s supporters.

Will the same Democrats who railed at Hank Paulson for his unexplained about-faces on bailout policy take out their wrath on the nominee who workled hand-in-glove with Paulson? Oh, please — this is Obama’s choice. But both sides should explore his views on fiscal, tax, and trade policy. We really don’t have much of an idea what the President-elect’s views are so this will be our first big clue.

We can only hope that the new Treasury Secretary brings to crisis management some qualities which Paulson did not — the ability to communicate with the public and Congress, a sense of restraint and modesty about government’s ability to figure this out, and a healthy respect for the law of unintended consequences. If so, and if he is bold enough to inform the President-elect that much of his campaign rhetoric (e.g. protectionism, tax hikes) is better left behind, he will be a very good selection indeed.



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