By Peter Schroeder - 07/03/11 09:34 AM EDT
Treasury Secretary Timothy Geithner's potential departure is highlighting how much Wall Street's reputation might have recovered from the financial crisis — and sparking chatter that one of their own could take his place.
Multiple reports indicated Thursday that Geithner is mulling an exit from public service after a deal is struck to raise the debt limit.
"I live for this work. ... I'm going to be doing it for the foreseeable future," he said Thursday at an event hosted by the Clinton Global Initiative. He noted that his son is returning to New York to finish high school, meaning he would be "commuting for a while."
But if Geithner does decide to leave the administration, one big question will
be whether a Wall Street figure would be in the mix to replace him. His
predecessor in the George W. Bush administration, Hank Paulson, was the
chairman and chief executive of Goldman Sachs before becoming Treasury secretary. His Wall Street experience was widely credited with helping him
steer the country through the financial crisis.
A year and a half ago, a nominee with extensive financial ties would have stirred public backlash, according to Brian Gardner of Keefe, Bruyette & Woods. But he said one could look no further than the White House for proof that public anger at Wall Street is waning.
Following the departure of his original chief of staff, Rahm Emanuel, President Obama reached right to Wall Street to pull out William Daley from JPMorgan Chase & Co., who also served as Commerce secretary under President Clinton.
"That's an indication that somebody with a Wall Street background is no longer persona non grata," said Gardner.
Speculation began to swirl about who would be a candidate to replace Geithner
almost immediately after word broke that he was considering leaving
Several names that are being floated have extensive connections to the world of
One popular name is Roger Altman, a former deputy Treasury secretary under Clinton who is also an experienced investment banker.
Another speculative pick is Jamie Dimon, the head of JPMorgan Chase & Co.,
the world’s largest investment bank.
A Treasury candidate might also face stiff resistance from Senate Republicans,
who have blocked a number of the White House’s nominees for financial
MIT economist Peter Diamond, who won a Nobel Prize for his research, withdrew his name to join the Federal Reserve Board after Republicans repeatedly blocked his selection. And nearly every GOP senator has vowed to head off any nominee to head the new Consumer Financial Protection Bureau unless several changes are made to the new agency.
"They'd challenge, I think, anybody. Even if it were Alexander
Hamilton," said Rep. Sandy Levin (D-Mich.), ranking member of the House
Way and Means Committee, in a Friday interview with Bloomberg Television.
A working knowledge of the financial markets would be a boon to any Treasury secretary, given that the government is still knee-deep in its efforts to overhaul the financial system through the Dodd-Frank reform law.
Furthermore, the role of the Treasury secretary has only become more important since Geithner came onboard. One section of Dodd-Frank established the new Financial Stability Oversight Council, which gathers the top regulators from across the government to monitor and address broad-based threats to the financial system. The Treasury secretary is chairman of that powerful panel.
Intimate knowledge of the workings of financial markets is "probably one of the things on the checklist that has to be checked off," Gardner said. "I don't think someone without experience, familiarity, knowledge of capital markets can come in and do an effective job."
Even though Geithner spent his career in public service, he still has been subject to criticism from a number of liberal and consumer groups who say he is too close to Wall Street.
"You want somebody who can tap into the fact that really all of us ... need jobs and growth," said Damon Silvers, policy director for the AFL-CIO.
While Wall Street ties could garner a closer look, they are not an automatic disqualifier, according to Bartlett Naylor, financial policy advocate for the consumer group Public Citizen.
"As long as you understand you're serving ... the rest of the nation, then fine," he said.
Naylor noted that some of the nation's best regulators come from Wall Street. Gary Gensler spent nearly two decades at Goldman Sachs, but now is "doing the Lord's work" as head of the Commodity Futures Trading Commission, Naylor said.
But a change of pace wouldn't be so bad, either.
"Why don't you give the rest of America a chance?" Naylor said. "Let's not simply go back and forth to Wall Street."