WASHINGTON – Treasury Secretary Timothy Geithner plans to leave his job after the presidential inauguration, opening the door for a new candidate ready to hit the ground running with a fresh round of negotiations with Congress on government spending cuts and the nation’s debt limit.
Geithner, the last holdover from President Obama’s original economic team, has been trying to leave his post for some time. Last time Geithner was in the same predicament, Obama convinced him to stay until the end of his first term, but now Geithner has said he intends to leave his post by the end of January even if the debt ceiling issue has not been resolved. With Geithner’s imminent departure, speculation has begun about his potential successor.
Jack Lew, a former two-time Office of Management and Budget (OMB) director and current chief of staff, reportedly will be nominated to the position by the president at 1:30 p.m. today. Lew was director of the OMB in the Clinton administration and ran Citigroup’s Alternative Investments unit, a proprietary trading group, during George W. Bush’s tenure at the White House. Lew left Wall Street and returned to Washington to serve as deputy secretary of state for management and resources in 2009. He joined the Obama administration as Peter Orzag’s replacement at the OMB in 2010.
Before his stint on Wall Street, Lew helped the Clinton administration negotiate a bipartisan budget deal with congressional Republicans. More recently, a Huffington Post profile of Lew said aides credit him and Gene Sperling with reducing the amount of budget savings sought by Republicans in 2011. During the debt limit talks that year, Lew reportedly irked House Speaker John Boehner’s staff as they found him too disrespectful and dismissive. While Lew did not directly negotiate with Congress on last week’s budget deal, he played an important role supervising the White House strategy and briefing Wall Street executives on the talks.
Although Lew does have some Wall Street experience on his resume, some in the financial industry do not believe that it is enough for the nation’s top finance job. Geithner, as former chairman of the New York Fed, brought to the job deep familiarity with the financial system. His predecessor, Henry M. Paulson, was chief executive officer of Goldman Sachs. Lew’s scant experience with financial markets and global banking regulation could come at a high cost during an international financial crisis.
Nevertheless, Lew’s qualifications as a dealmaker make him an obvious choice for a position that needs someone prepared to face Congress over the debt limit negotiations beginning as soon as next month. Lew is known in Washington as a first-rate negotiator with a deep understanding of federal spending and a person who can make difficult decisions to secure a bipartisan agreement.
“Jack has experience negotiating balanced budgets with a Republican Congress, and he’d bring that to bear on anything he worked on,” said Michael Barr, a former assistant secretary of the Treasury for financial institutions under Obama. In addition, he said that Lew would do a terrific job keeping the nation on the path of financial reform.
During his Senate confirmation hearing for his OMB chairmanship in 2010, Bernie Sanders (I-Vt.) asked Lew if he thought the deregulation of Wall Street had contributed to the financial crisis. “Senator, I don’t consider myself an expert in some of these aspects of the financial industry,” Lew replied. “My experience in the financial industry has been as a manager, not as an investment adviser.”
Much to the displeasure of financial regulation supporters, Lew went on to say that he did not think that Wall Street’s problems had much to do with deregulation, saying that in his opinion derivatives and too much leverage had a bigger role in the financial crisis.
“He’s not viewed as hostile to the business community, like most policymakers are,” an anonymous financial industry leader said in an interview last year for the National Journal. “From an industry standpoint, we could do a heck of a lot worse,” the banker said.
Lew’s appointment as Treasury secretary could be a sign that Obama values his experience negotiating with Congress and sends a signal that he will prioritize budget and tax policy negotiations in his second term.
The debt limit talks will be the first in a series of negotiations this year between Republicans and the Obama administration over the budget and spending. Last week’s budget deal temporarily postponed the automatic spending cuts that would have become effective Jan. 1 and extended the government’s ability to borrow money until the end of February unless an agreement is reached before then.
While Obama has said he will not bargain over the debt ceiling, Republicans – such as Senate Minority Leader Mitch McConnell (R-Ky.) – have said they want to link it to spending cuts. In an op-ed published Friday, Senate Minority Whip John Cornyn (R-Texas) said that Republicans should be prepared to force a partial government shutdown to extract concessions from Democrats on entitlement reform and spending cuts.
“It may be necessary to partially shut down the government in order to secure the long-term fiscal well being of our country, rather than plod along the path of Greece, Italy and Spain,” Cornyn wrote. “President Obama needs to take note of this reality and put forward a plan to avoid it immediately.”
If confirmed by the Senate, Lew would have to immediately get to work on three important negotiations resulting from the short-term “fiscal cliff” resolution. He will have to deal with the nation’s debt ceiling, nail down the 2013 budget, and decide whether spending cuts mandated by the 2011 Budget Control Act should be changed.
Despite weeks of speculation about Lew’s nomination, Republicans have not signaled that they plan to mount the same opposition they raised for Obama’s nomination of Chuck Hagel as secretary of Defense and the potential nomination of Susan E. Rice for secretary of State, which fell through.
The appointment also means that Obama will have to make another addition to his cabinet, as he will have to find what would be his fifth White House chief of staff.