After Geithner: Who's Up Next As Treasury Chief?
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Glenn Somerville
Reuters
May 24, 2012

Wanted for the Treasury Department: a new boss who can fix trillion-dollar-plus budget deficits, overhaul the tax system and spur a reluctant Europe into fixing its debt crisis. It's a tall order, especially when the new Treasury chief also must deal with a fractious Congress, and all for a salary lower than that paid to many junior Wall Street bankers.

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Economists, investors and veterans of past administrations are appraising potential successors to Treasury Secretary Timothy Geithner, either in a new Obama administration, if President Barack Obama is re-elected, or under Mitt Romney. Geithner has made it clear that he is leaving the post he has held since January 2009 even if Obama, a Democrat, beats Romney, the presumptive Republican presidential nominee, in the November 6 election.

Lots of names are making the rounds. Among Democrats, they include finance leaders like Larry Fink of asset management firm BlackRock and politically connected Washington insiders like fiscal expert Erskine Bowles. If the White House goes to the Republicans, Glenn Hubbard, a top Romney adviser, is considered a front-runner, as is Robert Zoellick, the outgoing World Bank chief who boasts Wall Street experience and a contact list that spans the globe.

With new partisan showdowns likely to flare up next year over taxes, spending cuts and the nation's debt limit, interest in the next Treasury boss is even greater than usual given the high economic stakes. "The next Treasury secretary is probably going to hold the most important job next to the president," said Sung Won Sohn, an economics professor at California State University Channel Islands.

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The problems at home in finding ways to scale back U.S. debt are huge. But Geithner's successor also will need a deft hand on the international front as Europe's debt problems simmer. Geithner has struggled to find a balance between helping Europe find a fix while not being too bossy. The next Treasury chief will face the same dilemma. Relations with China, the biggest U.S. creditor and an increasingly high-end manufacturing rival, will be another prime concern.

NOT ON THE RADAR
Romney's deep knowledge of markets honed during his years at private equity firm Bain Capital certainly has shaped his view about who would be best to lead Treasury. Romney may have come across candidates in the business world who struck him as perfect for the job, but they may not be widely known to Wall Street or Washington insiders. Stature is a must. Many analysts think a post-election lame-duck Congress will provide only a temporary fix to a potentially catastrophic situation looming at year's end. If Congress does not act, income tax cuts put in place under President George W. Bush are due to end for millions of Americans while automatic federal spending cuts would go into effect as mandated under last year's deal to raise the U.S. debt limit.

There is a premium on negotiating skills to help avoid an economic calamity. And whoever is selected may face a grinding Senate confirmation process.

The combination of tax increases and spending cuts could tip the economy back into recession. Democrats and Republicans want to avoid a train wreck but cannot agree on how to do it, whether through a combination of tax hikes and spending cuts, as Democrats propose, or spending cuts alone, as Republicans favor.

Geithner's successor likely will have to confront the issue even if Congress finds a short-term fix. That puts a premium on negotiating skills to help avoid an economic calamity. Whoever is selected may face a grinding Senate confirmation process. A well-known, accomplished candidate might fare better; but even then, there could be a surprise. Geithner's Senate confirmation hearing was at risk of derailment over his past failure to pay some taxes. He paid up all his tax liabilities after the Obama administration had signaled its intent to nominate him as Treasury secretary and admitted to some "careless" and "avoidable" errors.

Hubbard, dean of the business school at Columbia University in New York, is widely seen as the front-runner for the Treasury Department should Romney win the White House. A budget expert who also advised Romney during his 2008 presidential run, Hubbard led Bush's Council of Economic Advisers, crafted the 2003 Bush tax cuts, and was a senior Treasury Department official in the early 1990s.

RELATED: Hubbard: Fiscal Reform Must Come from Spending Cuts

On the Democratic side, things are less clear. Fink, chief executive at BlackRock, the world's biggest money manager, has expressed interest in the job to Wall Street colleagues, according to sources with close ties to the financial industry. Sources on Wall Street, one of whom worked at BlackRock and another who knows Fink personally, said they were aware of the interest in Fink as a potential candidate but could not offer an assessment of how seriously he wants the job. Fink's involvement in money management is a plus. It is a relatively staid part of finance that was untainted by the 2008 bailout of banks that remains unpopular with many voters.