Banking/Financial Institutions

Wall Street looks to fill Treasury secretary post after Geithner exit

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.

{mosads}While Geithner tried to downplay his potential departure, he also acknowledged
the personal pressures that are reportedly weighing on the decision.

“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
Treasury.

Several names that are being floated have extensive connections to the world of
finance.

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.

{mosads}But the financial sector is still smarting from the political fallout of the
financial crisis, and it remains unclear whether a nominee with strong Wall
Street ties could win public approval.

A Treasury candidate might also face stiff resistance from Senate Republicans,
who have blocked a number of the White House’s nominees for financial
positions.

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.

{mosads}And with the economic recovery still struggling, labor will
be looking for someone focused on boosting it across the board, not just in the
financial sector.

“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.”

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