Wanted: One good man, or woman, to serve as the Obama Administration’s next Secretary of the Treasury.
Like the presidency itself, the position likely will have scores of candidates eager and willing to fill it, lobbying for it with varying degrees of decorum and diplomacy. The problem is the same as that confronting the presidency itself: finding all the qualities that a Treasury Secretary needs in the shape of a single person.
The ideal candidate has to be adept at fiscal policy formulation, able to transform ideas into coherent and logical legislation or concepts that can be executed within the Treasury Department itself. He or she needs to have the trust of the president in order to be effective in shaping financial policy.
Moreover, he’ll need to have the diagnostic skills equivalent to those of the world’s best physicians at the Mayo Clinic, to understand just when the economy requires a light touch of stimulus or the hint of restraint. She also needs to command the respect of other participants in the financial system, whether those individuals oversee the economic and financial affairs of other nations or head the banks that serve as the arteries transporting capital throughout the economic system.
At any time, it’s tough to find the perfect individual for this role, and this year it is likely to be almost impossible. The incumbent, Timothy Geithner, is widely expected to be the first member of Obama’s first-term administration to submit his resignation (let’s not count forced departures like that of CIA honcho David Petraeus in that list) and that resignation will come hard on the heels of a fiercely fought campaign that revolved squarely around two radically different views of the economy and government’s role in it.
The man widely rumored to be the president’s top choice, Jack Lew, is an accounting geek and a veteran of Washington’s budget battles who has served both Obama and Clinton as budget director and now is the president’s chief of staff. Clearly, he commands Obama’s trust and has the president’s ear – a key ingredient in the mix. But he may well be a controversial choice when it comes to the Republicans, who claim he is partisan, and despite an earlier stint at Citigroup, he’s seen as more of a Beltway insider than a denizen of Wall Street.
Picking Lew – a smart, savvy negotiator described as an honest broker – would, pundits say, tell the Republicans that Obama is serious about emphasizing deficit reduction and tax reform. But is that a message that really needs to be delivered through the selection of a Treasury secretary? For starters, Obama has little choice but to come to grips with these matters. Then there is the fact that some on the Republican Party’s right wing likely will simply refuse to engage with those negotiations in any manner, and will refuse to believe that the president is acting in good faith.
Obama has a chance here to mend his strained relations with the financial community. Wall Street, which supported the president in his first run for office, largely turned against him during his first term and ended up backing Republican challenger Mitt Romney. And as the president sits down today to talk about the fiscal cliff with the CEOs of companies such as American Express, General Electric and PepsiCo, it’s hard not to notice that Wall Street leaders will be absent from the discussions.
Who on Wall Street could fit the bill in Washington? Goldman Sachs CEO Lloyd Blankfein may be a registered Democrat, but after his company emerged as the poster child for bad behavior within Washington and among Democrats, he switched his informal allegiance.
Similarly, the relationship between the president and JPMorgan Chase CEO Jamie Dimon has become more strained since the two tangled over how much regulation was appropriate for the financial sector in the aftermath of the crisis, with Obama pushing hard for Dodd-Frank and the Volcker Rule, and Dimon insisting that the array of new agencies and rules charged with overseeing Wall Street will add to complexity and costs. The public pushback likely ended any chance that Dimon will get the nod – even if it were a job he wanted.
One of the handful of loyal Wall Street Democrats said to be willing to take on the task is BlackRock CEO Larry Fink. His firm rode out the financial crisis with style and emerged as one of the winners; he also played a key role in crafting a solution the problem of the toxic waste like subprime loans and other distressed assets on banks’ balance sheets. Another private sector candidate whose name has been heard is Roger Altman, a former Lehman Brothers banker who decamped to found boutique investment bank Evercore Partners. Altman has navigated Washington’s shark-infested waters before, having served as a deputy undersecretary at Treasury back in the Clinton era.
Either of these men would command a degree of respect among most of the constituencies with which the new Treasury secretary will have to work. Two women’s names also have been mentioned: Sheryl Sandberg, chief operating officer of Facebook, and Sheila Bair, former head of the FDIC. Sandberg would demonstrate that the president wants to rebuild his ties not only with Wall Street but with business, although she wouldn’t be viewed with the same degree of gravitas as Fink, for instance, not having run a business within the financial sector itself.
Sheila Bair told me after a brief press conference at last month’s National Association for Business Economics that despite the strong views she has formed about what policies should be followed to make the financial system stronger (hint: “too big to fail” pops up often) that she has absolutely no interest in returning to Washington in an official capacity. Even if she did, her recent book, Bull by the Horns, with its criticism of the banks and of policymakers, likely has made that impossible. Meanwhile, Obama’s decision not to back the deficit reduction plan developed by Erskine Bowles, Bill Clinton’s former chief of staff, in collaboration with Republican Alan Simpson, would undermine Bowles’s credibility in his job from day one.
In a perfect world, we could combine the characteristics of three or even four of these candidates and come up with a single individual who will somehow – miraculously – be able to work with all the various and warring constituencies and grasp the issues at hand, from the fiscal cliff negotiations at home to the risks associated with Europe’s ongoing fiscal crisis and the need to build a constructive relationship with China. Sadly, that’s not an option. Given that the president is operating at a disadvantage, heading into negotiations with roughly the same kind of people he has already failed to reach agreement with, it might be better to pass up someone like Lew in favor of an equally intelligent Washington outsider like Fink who will be able to command a degree of respect, even if it is reluctant, from the other side of the aisle. That is, if Fink is willing to take the job.