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President-elect Barack Obama introduced his economic team on Monday in Chicago. From left are, Timothy F. Geithner, Christina Romer and Lawrence Summers.

President-elect Barack Obama introduced his economic team on Monday in Chicago. From left are, Timothy F. Geithner, Christina Romer and Lawrence Summers.

Citing an “economic crisis of historic proportions” President-elect Barack Obama announced the key members of his economic team at a news conference in Chicago.

Update | 12:34 p.m. The Q & A was over pretty quickly, and Mr. Obama and his newly introduced economic team filed offstage.

Here’s a quick thumbnail that Mr. Obama gave in introducing each of them:

Mr. Geithner: “offers not just extensive experience shaping economic policy and managing financial markets – but an unparalleled understanding of our current economic crisis, in all of its depth, complexity and urgency. Tim will waste no time getting up to speed. He will start his first day on the job with a unique insight into the failures of today’s markets – and a clear vision of the steps we must take to revive them.”

“Growing up partly in Africa and having lived and worked throughout Asia; having served as Under Secretary of the Treasury for International Affairs – one of many roles in the international arena; and having studied both Chinese and Japanese, Tim understands the language of today’s international markets in more ways than one.”

Mr. Summers: “Larry helped guide us through several major international financial crises – and was a central architect of the policies that led to the longest economic expansion in American history, with record surpluses, rising family incomes and more than 20 million new jobs. He also championed a range of measures – from tax credits to enhanced lending programs to consumer financial protections – that greatly benefited middle income families.”

“As a thought leader, Larry has urged us to confront the problems of income inequality and the middle class squeeze, consistently arguing that the key to a strong economy is a strong and growing middle class. This idea is the core of my own economic philosophy and will be the foundation for all of my economic policies.”

Ms. Romer: “Christina is both a leading macroeconomist and a leading economic historian, perhaps best known for her work on America’s recovery from the Great Depression and the robust economic expansion that followed. Since 2003, she has been co-director of the National Bureau of Economic Research Monetary Economics program. She is also a member of the Bureau’s Business Cycle Dating Committee – the body charged with officially determining when a recession has started and ended – experience which will serve her well as she advises me on our current economic challenges.”

“Christina has also done groundbreaking research on many of the topics our Administration will confront – from tax policy to fighting recessions. And her clear-eyed, independent analyses have received praise from both conservative and liberal thinkers alike. I look forward to her wise counsel in the White House.”

Ms. Barnes: She has a “brilliant legal mind” and is “one of the most respected policy experts in America, will be serving as director of my Domestic Policy Council.” She will be “working hand-in-hand with my economic policy team to chart a course to economic recovery. An integral part of that course will be health care reform – and she will work closely with my Secretary of Health and Human Services on that issue.”

“As executive vice president for policy at the Center for American Progress, Melody directed a network of policy experts dedicated to finding solutions for struggling middle class families. She also served as chief counsel to the great Senator Ted Kennedy on the Senate Judiciary Committee, working on issues ranging from crime to immigration to bankruptcy, and fighting tirelessly to protect civil rights, women’s rights and religious freedom.”

Related: What Economic Blogs Are Saying

Auto Industry | 12:32 p.m. Question: What should be done about the auto industry?

Mr. Obama gets tough on Detroit and says he was “surprised” that the auto execs went to Washington last week without being better prepared.

“We can’t allow the auto industry to simply vanish,” he says, but “we can’t just write a blank check.” Nor, he said, can taxpayers be expected “to pony up more money to an auto industry that has been resistant to change.”

Then this: “I was surprised they didn’t have a better-thought-out proposal when they arrived in Congress.” He says Congress “did the right thing to say you guys need to come up with a better plan and come back.”

But any additional money for the industry, he says, should assure a long-term sustainable auto industry and is not just “kicking the can down the road.”

Economic Approach | 12:27 p.m. Question: How will your approach to the economy differ from the “ad hoc” approach of the last year?

Mr. Obama says he wants to make sure that moving forward he is “clearly articulating” his end goals, what he is trying to achieve and that there is “clarity and transparency” to his plan. Markets have been confused about the overall direction of the economy, he says, and he wants to provide clarity.

Stimulus Package? | 12:25 p.m. Ah, now we’ve got sound. But he still declines to discuss the size of the stimulus package. He says there is a consensus “across the spectrum” that we need an economic stimulus package and that it’s big enough to give a “jolt” to the economy. He is vague about how to pay for it beyond “reforms” in Washington.

On to Questions | 12:19 p.m. In the question-and-answer period, the questions, alas, are inaudible. But Mr. Obama declines to put a price tag on his stimulus package. Apparently he was asked about the Bush tax cuts because Mr. Obama says he isn’t sure exactly how those tax cuts will be repealed.

No Shortcuts | 12:15 p.m. “We need a recovery plan for both Wall Street and Main Street – a plan that stabilizes our financial system and gets credit flowing again, while at the same time addressing our growing foreclosure crisis, helping our struggling auto industry, and creating and saving 2.5 million jobs – jobs rebuilding our crumbling roads and bridges, modernizing our schools, and creating the clean energy infrastructure of the twenty-first century,” he says. “Because at this moment, we must both restore confidence in our markets – and restore the confidence of middle class families, who find themselves working harder, earning less, and falling further and further behind.”

He adds: “Again, this won’t be easy. There are no shortcuts or quick fixes to this crisis, which has been many years in the making – and the economy is likely to get worse before it gets better. Full recovery won’t happen immediately. And to make the investments we need, we’ll have to scour our federal budget, line-by-line, and make meaningful cuts and sacrifices as well – something I’ll be discussing further tomorrow.”

‘Crisis of Historic Proportions’ | 12:09 p.m. “We are facing an economic crisis of historic proportions,” Mr. Obama says, and we need the best minds to bring sound judgment and fresh thinking. He said his team are people who share his fundamental belief that we can’t have a thriving wall street without a thriving Main Street.

The News Conference Begins | 12:03 p.m. The market continues to cilmb as Mr. Obama opens his news conference. The Dow is up 306 points so far.

In addition to Mr. Geithner, Mr. Summers and Ms. Romer, Mr. Obama announces Melody C. Barnes will be director of the Domestic Policy Council, which will Ms. Barnes previously served as executive vice president for policy at the Center for American Progress and as chief counsel to Senator Edward M. Kennedy on the Senate Judiciary Committee from December 1995 until March 2003, according to the transition team. Mr. Obama said that an integral part of Ms. Barnes’s job will be working closely with the Secretary of Health and Human Services on health care reform.

Prepared Text

The Economic Team | 11:53 a.m. President-elect Barack Obama is about to hold a news conference in Chicago and announce the members of his economic team, including Timothy F. Geithner, president of the New York Federal Reserve, as his Treasury secretary.

Mr. Obama also plans to name Larry Summers, who was Treasury secretary during the Clinton administration, as the head of his National Economic Council and Christina Romer, a well-regarded economist at the University of California at Berkeley, to lead the Council of Economic Advisers.

And he is expected to make the case for an expanded economic stimulus package to create or preserve 2.5 million jobs during the next two years.

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Timothy Geithner is a seasoned crisis manager with a temperament to match that of Barack Obama

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STOCKMARKETS soared on Friday November 21st when investors learned that Barack Obama would nominate Timothy Geithner as his Treasury Secretary. That might seem odd. The president of the Federal Reserve Bank of New York was already a favourite for the post. And he brings no magical solution to the financial crisis: he has been battling it for over a year, with no end in sight.

The 494-point (6.5%) jump in the Dow Jones Industrial Average is more a statement about investors’ anxiety over the unsettled state of economic policymaking. News of the Treasury nominee holds out the prospect of a more coherent and forceful approach to the crisis. The current treasury secretary, Hank Paulson, is reworking the $700 billion bail-out plan on the fly, policymakers are struggling over a new approach to foreclosures, the status of the mortgage agencies, Fannie Mae and Freddie Mac, is in limbo, and Congress has just sent the carmakers, teetering close to insolvency, home empty handed. The two months before Mr Obama is sworn in seem like an eternity.

Investors were also relieved that their darkest fears of a Sarah Palin-like shock announcement did not come to pass and that Mr Obama, as in his other important appointments, has chosen ability over connections. Mr Geithner does not know Mr Obama well and has no notable ties to the Democratic Party. But for this cabinet post more than any other, an overtly political appointment would have been corrosive to investor confidence.

Assuming he is nominated Mr Geithner brings two crucial qualities. First, he represents continuity. From the first days of the crisis last year, he has worked hand in glove with Ben Bernanke, the Fed chairman, and Mr Paulson. He can continue to do so while awaiting confirmation. If Citigroup, for example, needs federal help, Mr Geithner will be involved. An unknown when he joined the New York Fed in 2003, he is now a familiar face to the most senior executives on Wall Street and to central bankers and finance ministers overseas.

Second, he represents competence. He has spent more time on financial crises, from Mexico and Thailand to Brazil and Argentina, than probably any other policymaker in office today. Mr Geithner understands better than almost anyone that in crises you throw out the forecast and focus on avoiding low probability events with catastrophic consequences. Such judgments are excruciating: do too little, and you undermine confidence and generate a bigger crisis that needs even bigger policy action. Do too much, and you look panicked and invite blowback from Wall Street, Congress and the press. At times during the crisis Mr Geithner would counsel Mr Bernanke on the importance of the right “ratio of drama to effectiveness”.

Mr Geithner looks a lot younger than his 47 years. He skateboards and snowboards and exudes a sort of hipster-wonkiness, using “way” as a synonym for “very” as in “way consequential” and occasionally underlining his point with the word “fuck”. 

In temperament he seems similar to Mr Obama: he is suspicious of ideology, questions received wisdom

 

In normal times, risk aversion damps economic cycles; in a crisis, it accentuates them, leading to withdrawn credit, evaporating liquidity, margin calls, falling asset prices, and more risk aversion. “The brake becomes the accelerator,” as he puts it. Indeed, although he worked alongside Mr Paulson on the crisis, he has at times advocated a more aggressive approach. For example, news reports say that he was not comfortable with Mr Paulson’s decision to take public money off the table in the ultimately unsuccessful effort to save Lehman Brothers. He has not always got it right: he was the most important architect of the original bail-out of American International Group, an insurer, which in time has proved flawed, requiring significant amendment.

Mr Geithner looks a lot younger than his 47 years (though not as young as he did before the crisis began). He skateboards and snowboards and exudes a sort of hipster-wonkiness, using “way” as a synonym for “very” as in “way consequential” and occasionally underlining his point with the word “fuck”. In temperament he seems similar to Mr Obama: he is suspicious of ideology, questions received wisdom, likes a competition of ideas and is keenly aware of how uncertain the world is.

Mr Geithner learned about crisis management as an aide to Lawrence Summers who rose to Treasury Secretary under Bill Clinton. Mr Summers was the other candidate for the job under Mr Obama, and his appointment would probably also have been greeted enthusiastically. He will reportedly join the administration in a White House advisory role.

Mr Geithner leaves a big hole; the New York Fed president is by tradition the financial system’s go-to crisis manager, and that job has never been more important in the modern era than it is now. A probable candidate to succeed him is a Fed governor, Kevin Warsh. Though young (he is just 38) he has been a central player in the crisis thanks to his extensive contacts in the financial world and closeness to Mr Bernanke, who puts great store in Mr Warsh’s feel for politics and markets (see our recent blog post). That appointment will be made by the board of the New York Fed.

Mr Geithner faces a huge job. He will have critical decisions to make on whether to enlarge or alter the $700 billion Troubled Asset Relief Programme, what sort of firms will qualify for its money, whether and how to bail out the carmakers, what to do with the flailing mortgage agencies, Fannie Mae and Freddie Mac, and how to deal with countless other chapters in the continuing crisis. Unlike Mr Summers he is not an economist and brings no expertise to many of the big economic-policy questions that the Obama administration will confront such as health care, fiscal policy and taxes, even though he will be the primary spokesman on the administration’s economic policies.

He is a quick learner: within a year of joining the New York Fed he could debate the intricacies of monetary policy with academic experts. But he will join an administration rapidly filling up with heavyweights on economic policy, not least of them Mr Summers. Indeed, one of the big questions of the new team that Mr Obama is expected to unveil on Monday is just how Mr Summers, a brilliant but intimidating and sometimes abrasive figure, will fit in.

Mr Obama is assembling a formidable economic team. With the economy perhaps on the precipice of its worst recession since the Depression, he will need it.

Source: Economist

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