Treasury Pick Is Key Decision for Second Term

Timing of Geithner’s departure depends on the resolution of the fiscal cliff.

President Barack Obama, newly re-elected, now confronts two questions that he has been avoiding for more than a year: Who will replace Treasury Secretary Tim Geithner and when.

Obama’s decision, probably among the first personnel moves he makes, may set in motion a revamping of his economic and national security team, according to four current and two former administration officials who spoke before the outcome of the election was clear. Some advisers will depart and others will take on jobs that are opened up.

“The first thing is Treasury,” said former White House Chief of Staff Bill Daley. “You kind of have to figure out that one before everything else.”

After becoming only the second president since World War II to win re-election with the unemployment rate above 6 percent, Obama will be shuffling his Cabinet and senior staff while negotiating with Congress to avoid $607 billion in automatic tax increases and spending cuts that threaten to stunt U.S. economic growth.

In addition to replacing Geithner, Obama faces the departure of Secretary of State Hillary Clinton, who has said she isn’t planning to serve in a second Obama term. The Commerce Department is headed by an acting secretary, Rebecca Blank, and Defense Secretary Leon Panetta, the oldest Cabinet member at 74, hasn’t indicated whether he will stay on.

Many of the positions that will have to filled are subject to Senate confirmation.

Obama hasn’t signaled his intentions to his senior staff, according to administration officials, who spoke on condition of anonymity to discuss private deliberations.

The timing of Geithner’s replacement depends on whether the White House can reach an agreement with the lame duck Congress on a deficit reduction plan to avoid triggering spending cuts and tax increases known as the fiscal cliff. If a deal can be reached before the Jan. 1 deadline, Geithner could leave as soon as it is completed.

If the solution is left for the next Congress, Obama may ask Geithner to stay, either to work on a deal or to reassure financial markets about the U.S. government’s ability to trim the deficit.

“If they get a deal, he’ll stay until early January,” Daley said. “If they don’t get a deal, they have to wait until they have someone announced and probably confirmed.”

Once Obama settles on a new treasury secretary, other jobs, including chief of staff, National Economic Council director and Office of Management and Budget director, can be filled, said the four current officials who requested anonymity.

One of the top potential candidates for the Treasury job is White House Chief of Staff Jack Lew, the officials said.

A onetime aide to former Speaker Tip O’Neill who served as OMB director for Obama and former President Bill Clinton, Lew would bring a deep understanding of the tax and spending issues that could be at the center of the administration’s negotiations with Congress in a second term. He also has relationships with key congressional leaders and Obama’s trust, according to the officials.

Another possible contender is Erskine Bowles, who served as Clinton’s chief of staff and was co-chairman of a bipartisan panel that produced a plan to cut the deficit, the officials said. Bowles, though, rankled some White House aides by criticizing the president for not embracing his blueprint, they said.

Lew and Bowles declined to comment for this story.

 

Geithner’s Legacy

Roger Altman, chairman of Evercore Partners Inc. and a deputy treasury secretary in the Clinton administration, said Geithner will leave a good legacy.

“History is going to look very kindly on Tim,” Altman said in a Bloomberg Television interview. Obama “has a lot of choices and I know he’ll make a good one.”

If Obama doesn’t pick Lew for Treasury, Lew may return to New York, where he worked for Citigroup Inc.’s Alternative Investments before joining the administration, two officials said. Either scenario would leave a vacancy at the chief of staff job at the White House.

The chief of staff is the president’s gatekeeper and is a pivotal White House position.

Contenders for the job would include Mike Froman, a deputy national economic adviser and Harvard Law classmate of Obama’s; Ron Klain, a former chief of staff to Vice President Joe Biden; Denis McDonough, Obama’s deputy national security adviser and campaign loyalist; and Tom Nides, the deputy secretary of state and a former chief operational officer at Morgan Stanley. All four declined to comment for this story.

Consumed by the campaign and crisscrossing the country, Obama hasn’t been focused on personnel decisions and many of his senior aides said they haven’t discussed with him his plans for the second term.

At OMB, Jeff Zients, the current acting director, may be in line for secretary of commerce, said two of the officials. Rob Nabors, a former deputy at OMB, would be a candidate to replace Zients.

The leading candidates to succeed Clinton as secretary of state may be Massachusetts Senator John Kerry and United Nations Ambassador Susan Rice, according to the four officials. Tom Donilon, Obama’s national security adviser is a long-shot choice, they said.

Rice was a finalist for the World Bank presidency last spring. Obama picked then-Dartmouth College President Jim Yong Kim, keeping Rice available for other positions in his second term, officials said. Her chances of confirmation may be hurt by her remarks about the deadly attack on the U.S. consulate in Benghazi, Libya, that Republicans have criticized as part of an administration campaign of deception surrounding the incident.


 

Bloomberg News

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