I'd like to discuss the most important Obama cabinet appointment: Secretary of the Treasury.
There is no doubt that we are heading into trying economic times (that may be an understatement.) It seems that every day we get more news of economic disaster at home or abroad, and in the interconnected global markets it feels like we are in one neverending domino chain as markets crash all around the world and then feed into the next market crash. Over one million jobs have been lost just since January. Wages are flat or declining and both crime and bankruptcies are on the rise. Further, with trillions of dollars in Federal debt and no prospect of any real growth in the foreseeable future it looks like this situation will last for years.
Into this cauldron, there will come a new economic team (not completely new, of course-- Federal Reserve Chairman Ben Bernanke serves a staggered term so he will have to be included in any decisions that are made now.) The most important appointment that President-Elect Obama will make is that of Secretary of the Treasury. Whoever he picks will be the administration's point man (or woman) on the economy, and this economy is the biggest challenge that any incoming administration has faced in at least three quarters of a century. Armed for the challenge though the next Treasury Secretary will have been made flush with as much as a trillion dollars of taxpayer money to bail out some, but not enough to bail out all, of those whose ships are sinking. His or her job will be to try and keep the economy from sinking, and probably making some very tough decisions about where to put down a huge, but limited supply of chips.
I'd like to look at some who are rumored to be leading candidates.
During the campaign we heard the name of Warren Buffett, who both candidates lavished praise on and who is known to be a close economic advisor to Obama and endorsed him during the campaign. Buffett is an American legend, parlaying a $12,000 per year job as a stockbroker into one of the world's greatest fortunes. He has displayed an uncanny understanding of how markets work and rarely made a bad investment. During the present economic meltdown, Buffett did his part of stabilizing the banks by publically announcing that he was investing five billion dollars in Goldman Sachs, which stabilized the bank's share price and gave it some hard assets. There is no doubt that Obama will continue to seek Buffett's advice on economic issues. However I don't think that Obama will ask him to be Secretary of the Treasury, nor that Buffett wants the job. Buffett, who is 77, has largely given up day to day operation even of his own company (Berkshire Hathaway) in order to focus on his own extensive philanthropic pursuits and is far more likely to be used only as a resource or consultant than to be asked to manage the entire economy.
Another name that has been bandied about is Jamie Dimon, the CEO of Wall Street Bank JP Morgan Chase. Dimon has run the bank well, and it has avoided many, though not all, of the pitfalls that have befallen other banks (in fact earlier this year it was Chase that stepped in and swallowed up the assets of the defunct Washington Mutual.) One of Dimon's biggest assets, and one reason Obama seems to like him, is that Dimon isn't shy about telling the truth instead of sugar coating bad news. That quality was on full display this week as Dimon said that rising unemployment was likely to add to the number of delinquencies the bank (and other banks) could face, prompting banking analyst Richard Bove cut his price target on Dimon's bank from $45 per share to $37. I doubt if Obama will choose Dimon either though. Dimon's biggest liability may be where he works now. Many people blame Wall Street banks for getting us into this mess (though that is in fact a gross oversimplification, at best they were only a piece of a larger whole.) So choosing the CEO of a big Wall Street Bank might not go over well with the public, and just recently Barry L. Zubrow, the chief risk officer for JP Morgan Morgan had to answer questions about whether the bank was using government bailout money to acquire smaller banks instead of to give loans to customers. That may be a mess that the Obama administration doesn't want to step in.
Another name that some have mentioned as a possible Treasury Secretary is Timothy Geithner. Geithner is the President of the Federal Reserve Bank of New York. There is no doubt that Geithner has experience commensurate with the job, but on the other hand he has been a member of the Federal Reserve (and therefore was in on all the decisions they made) since 2003. This again suggests that while some people may be pushing for Geithner, Obama won't pick him. Like Dimon, Geithner can be blamed for helping create the current mess, and he doesn't even have the cover of a public record like Dimon has of sometimes bucking the trend to suggest that he would be willing to make the hard decisions that the next Treasury Secretary must be willing to make. Another knock on Geithner is that as a free marketeer and advocate of deregulation (at least he was when it had some advocates) he is unpopular with organized labor. There is no question that unions were a huge part of the Obama coalition and helped him hold together the working class white voters in states like Ohio and Pennsylvania this year. That doesn't automatically disqualify Geithner but realistically Obama won't want to begin his tenure by ticking off some of his most critical supporters.
If Obama wants experience in the post, he may turn to either of two former Clinton treasury secretaries: Robert Rubin or Lawrence Summers. Both served as treasury secretary during a time of economic prosperity and both have the advantage that they will come in already knowing the abilities and limitations of the position so that they can hit the ground running. My guess is that if Obama follows this path he is tempermentally more inclined to go with Summers, more of a low-key 'get things done' kind of guy instead of the sometimes outspoken Rubin. On the other hand, Summers made some sexist comments last year in his job as President of Harvard University. While he apologized for them it might be tough to swallow for some feminists if Summers were named to Treasury-- especially if someone other than Hillary Clinton becomes Secretary of State.
Another Clinton official who may get a look is Laura Tyson, who served as the chair of Bill Clinton's Council of Economic Advisors. Her advantage would also be that she served and advised during prosperous times, and has been away from both government and Wall Street (teaching economics at the University of California at Berkeley) while everything has been going to pot. If Tyson is selected then she would also be the first ever female Treasury Secretary (we've had two female treasurers, Francine Neff and Mary Ellen Withrow, but that is a lower level position often confused with the Secretary of the Treasury.)
If he instead opts for something out of the ordinary, there are a couple of possibilities out there that could shake things up a bit. One of these is Eric Schmidt, the CEO of Google. Certainly in today's rapidly changing and increasingly technological economy, Schmidt would fit right in with Obama's perspective on painting the future in broad brush strokes rather than doing what others have expected, tested and possibly found wanting. No one questions Schmidt's business acumen, and with Obama's belief in technology as a path to a better future it's no wonder that Schmidt's name has come up in some discussions about Treasury Secretary. Another name that I've seen once or twice and which would also confound the experts is Mitt Romney, who ran for President as a Republican earlier this year. After losing to John McCain in a bitter primary, Romney endorsed and worked for McCain and proved he could be a team player, and he did run a successful business. Obama has pledged to include Republicans in his cabinet, but I'd be surprised if he did so in such a high profile position-- that would also be a break with the past (Bill Clinton appointed Republican William Cohen as Secretary of Defense and George W. Bush appointed Democrat Norman Mineta as Transportation Secretary.) Obama might also run the risk of setting up a Republican known to have higher ambitions to run against him in 2012; if Romney were named and then the economy turned around and boomed then Romney would rightly or wrongly claim a lot of the credit. One other name has been mentioned-- Paul Volcker. Volcker has served as a chairman of the Federal Reserve-- between 1979 and 1987 (having been appointed by Carter and reappointed by Reagan.) Volcker is so old, he'd be new. On the other hand, he's also so old, he's old. In fact Volcker is even older than Warren Buffett.
To be honest, I've not got a clue as to who the President-Elect will choose. There are some very strong candidates, but each of them also comes with some drawbacks-- so there is no obvious choice. But who Obama picks may well give us an insight into exactly what his strategy is for dealing with the economy.