The second most important cabinet post President Obama will have to choose immediately? Secretary of the Treasury. Here are the names buzzing around Wall Street and the Water Cooler. Which one do you prefer or do you have another idea?
First round draft choice (so to speak) is Timothy F. Geithner (born August 18, 1961) is the 9th president of the Federal Reserve Bank of New York. In that role he also serves as Vice Chairman of the Federal Open Market Committee (FOMC). Geithner was born in New York City. He graduated from International School of Bangkok, Thailand. Mr. Geithner graduated from Dartmouth College with a B.A. in government and Asian studies in 1983 and from the Johns Hopkins School for Advanced International Studies with an M.A. in International Economics and East Asian Studies in 1985. He has studied Japanese and Chinese and has lived in East Africa, India, Thailand, China, and Japan. He worked for Kissinger and Associates in Washington, D.C., for three years and then joined the International Affairs division of the Treasury Department in 1988.
In 1999, he was promoted to Under Secretary of the Treasury for International Affairs and served under Treasury Secretaries Robert Rubin and Lawrence Summers.
Just recently Geithner played a leading role in this year’s Bear Stearns drama that was a critical point in the credit crunch. Should he win the post, it would be at the expense of several prominent current and former Wall Street bankers–including prominent Democratic contributors–who names have been floated as candidates for the job.
Jamie Dimon, 53, is CEO of JPMorgan Chase, a man of big bold strokes who is betting that he can turn bank and brokerage junk into solid gold for his firm and his reputation. Just hours after lender Washington Mutual went belly-up Thursday in the biggest bank failure in history, Chase gobbled it up. There were others interested in WaMu – Citigroup and Bank of America among them – but Dimon won out with a $1.9 billion bid.
Jamie Dimon has been an economic adviser to the Obama campaign, but his reputation for bluntness could be seen as a drawback in Washington circles and he already has his hands full with the fallout from the credit crunch.
Prior to his political career, Corzine worked in banking and finance. In the early and mid 1970s, he worked for Midwest banks (Continental-Illinois National Bank in Chicago, Illinois and BancOhio National Bank in Columbus, Ohio) during and after his master of business administration (MBA) studies at the University of Chicago Graduate School of Business. Then in 1975 he moved to New Jersey and began his career with Goldman Sachs. He eventually rose to become Chairman and co-CEO of the firm, but after he became involved in the rescue package for the Long Term Capital Management in 1998, he was squeezed out of the firm. Despite his departure from Goldman Sachs, he earned what has been estimated to be $400 million during the 1999 initial public offering of the company
One would think that Former Secretary Robert Rubin would be a shoe in. President Clinton called him the “greatest secretary of the Treasury since Alexander Hamilton.” “During his tenure as Treasury Secretary,” Senator Chuck Hagel (R-NE) said, “Bob was an ideal public servant who put policy before politics.”
Yet critics credit Rubin with helping create the conditions for the Financial crisis of 2007–2008, as a result of the policies he pursued as Treasury Secretary. Together with then-Federal Reserve chairman Alan Greenspan, Rubin strongly opposed the regulation of derivatives, when such regulation was proposed by then-head of the Commodity Futures Trading Commission (CFTC), Brooksley Born. Over-exposure to credit derivatives of mortgage-backed securities – or credit default swaps (CDS) was a key reason for the failure of US financial institutions Bear Stearns, Lehman Brothers, Merrill Lynch, American International Group, and Washington Mutual in 2008.
Arthur Levitt Jr., a former chairman of the Securities and Exchange Commission, has said in explaining Mr. Rubin’s strong opposition to the regulations proposed by Ms Born that Mr. Greenspan and Rubin were “joined at the hip on this.” “They were certainly very fiercely opposed to this and persuaded me that this would cause chaos.”
According to the New York Times, “In November 1999, senior regulators including Mr. Greenspan and Mr. Rubin recommended that Congress permanently strip the CFTC of regulatory authority over derivatives.” This advice was accepted and derivatives were kept clear of regulation by the CFTC.
Warren Buffett later called derivatives “financial weapons of mass destruction”, and the lack of regulation of derivatives played a key role in the 2008 financial crisis.