Leading by Appointment

November 25, 2008 Topic: Economics Region: Americas

Leading by Appointment

Tim Geithner, Obama’s pick for Treasury, is smart and affable. But will he be able to fix the financial crisis?

If Tim Geithner weren't so nice, he would probably be insufferable right now. For a few weeks, Geithner was my boss when I worked at Treasury. Even after he left, I never heard a single Treasury employee say a bad thing about him. This befits his reputation as someone who was exceptionally smart (like Larry Summers) and someone who was surprisingly affable (not like Larry Summers at all).

This is a good thing too, because one could forgive Geithner right now if his head swelled just a little bit. The Dow Jones Industrial Average shot up five hundred points on Friday as word of his appointment leaked. The Dow jumped close to another four hundred points yesterday after Obama officially introduced him. One has to wonder if, sometime this week, when Geithner's wife asks him to do the dishes, he will be tempted to respond, "Have you caused the Dow to jump by more than ten percent? I didn't think so!"

As Obama has announced or leaked his economic appointments, Geithner also bucks another trend-he's getting a promotion. Lawrence Summers has gone from Treasury Secretary to chair the National Economic Council. Bill Richardson has gone from Energy Secretary to the Department of Commerce. Given their prior positions in the Clinton administration, these are at best lateral career moves (akin to She Who Must Not Be Named But Received 18 Million Votes in the primaries).

The fact that Geithner is moving up is a testament to his capabilities. Substantively, Geithner has the perfect background for his new job. As Noam Scheiber chronicled recently in The New Republic, Geithner was a career civil servant at Treasury before Summers chose him to be his consigliere. Since then, he's served in high-ranking positions at Treasury, the International Monetary Fund and the Federal Reserve Bank of New York. Given the global nature of the crisis, it was smart to pick someone who could play nice with other finance ministers (again, not really Larry Summers). Indeed, as Megan McArdle observes, the only downside to Geithner's selection is that someone equally capable must now be found to become the president of the New York Fed.

Just as important, given the current climate, is where Geithner has not served. Unlike Bob Rubin or Henry Paulson, Geithner has not spent time in the private sector on Wall Street. So there is no collapsing financial institution that can be pinned on him. One of the greatest assets Geithner brings to Treasury is that although he is known and respected on Wall Street, he is not of Wall Street.

Will his appointment make a difference? Geithner won't take office until January 20, and a disturbing number of things can crash between now and then. Financial markets, however, like to price in rational expectations of the future. Geithner's appointment,in tandem with Summers, eliminates the one thing financial markets hate above all else-uncertainty.


Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and a senior editor at The National Interest.