President-elect Barack Obama got high marks from the White House to Wall Street on Monday for choosing crafty economic policymakers to lead the nation through the worst financial crisis since the Great Depression.
"Brilliant," "outstanding" and "exceptionally talented" were some of the words used to describe his two top choices — Timothy Geithner, chairman of the Federal Reserve Bank of New York, for Treasury secretary, and former Treasury secretary Lawrence Summers for National Economic Council director — and that came from Republicans.
"It's hard for me to imagine a better team than this one," said Pete Peterson, co-founder of the Blackstone Group, who chaired the search committee that chose Geithner for the New York Fed. Peterson, a veteran of the Nixon administration, said Geithner, 47, "has everything that anyone could ask for" in a Treasury chief.
Of Summers, 53, he said, "If there's a more brilliant economist in the United States, I wouldn't know who that is."
Both Geithner and Summers were lauded by Republicans and Democrats alike as pragmatists who understand how to use the levers of government in the financial sector — something that both sides agree has become increasingly necessary as the recession worsens.
In addition to Geithner and Summers, Obama announced two other members of his economic team: Christina Romer, 49, a University of California-Berkeley economist, as chairwoman of the Council of Economic Advisers; and Melody Barnes, 44, a former counsel to Sen. Edward Kennedy, as director of the White House Domestic Policy Council.
Taken together, experts said, the first policy team unveiled by Obama represents:
•Academic smarts. Summers is a former president of Harvard; the others have similar academic backgrounds.
•Practicality over ideology. Geithner is seen as a problem-solver, Peterson said. His strength is "listening carefully to what the problem is, and then deciding on a pragmatic basis what ought to be done about it."
•Wall Street smarts without the ties. "You need economists who understand financial markets deeply but don't necessarily come from financial markets," said Jared Bernstein of the liberal Economic Policy Institute. "Both Summers and Geithner know the books down there, but they're not of the Street."
House Budget Committee chairman John Spratt, D-S.C., called Obama's top choices "modern-day heirs of great economists like Keynes," a reference to British economist John Maynard Keynes, who advocated government intervention to stimulate economic growth.
The question that hung over Monday's unveiling of Obama's economic team — the first of what will be many Cabinet-level introductions — was how much intervention they'll recommend.
Obama wasn't saying, except to say a new stimulus package is "going to be costly."
House Minority Leader John Boehner and some other Republicans warned about new spending. "As we proceed, we should start by listening to the American people, who do not believe increasing government spending is the best way to put our economy back on track," he said.
Greg Valliere, chief political strategist with the Stanford Financial Group, said he understands Obama's position that the nation has only one president at a time. But he said "the financial markets hate uncertainty … a bit more detail would have been well-received."
Stan Collender, managing director for Qorvis Communications, a public affairs firm in Washington, D.C., agreed that "at least a hint of the size (of a new stimulus package) would have made some sense." But he said if Obama proposes specific figures so soon, "somebody is going to shoot them down."
Reaction was positive from the Bush administration. White House deputy press secretary Tony Fratto called Geithner "exceptionally talented." Treasury Secretary Henry Paulson expressed confidence in "his understanding of markets, his judgment and leadership, and his ability to meet the challenges that lie ahead."
The team also got a major thumbs-up from Wall Street. The Dow Jones industrial average jumped nearly 400 points Monday to 8443, adding to a nearly 500-point rally late Friday when word of Geithner's nomination went public.
"Investors are looking for clarity of direction, and they are getting it with the designation of the economic leadership team," says David Kotok, chief investment officer at Cumberland Advisors. "They like what they see, they recognize the names, and they have comfort in the choices."
Smart people 'not enough'
While Geithner and Summers are likely to craft Obama's stimulus package, it's not clear who will push it through Congress. Douglas Holtz-Eakin, former director of the Congressional Budget Office and the top economic adviser in Republican John McCain's presidential campaign, said they bring more brains than power of persuasion.
"If he was dean of the faculty, he would have recruited an outstanding College of Arts and Sciences," Holtz-Eakin said. But "having bright people who have great records is not enough."
Geithner has been intricately involved in the Bush administration's response to the financial crisis, including its bailouts of AIG, Bear Stearns and Citigroup and its decision not to help Lehman Bros. He also brings vast international experience and has studied Chinese and Japanese.
"Tim understands the language of today's international markets in more ways than one," Obama said.
Summers is a veteran of the Clinton administration and, like Geithner, a protégé of former Treasury secretary Robert Rubin. He is viewed as an expert on the interrelationship between the public and private sectors.
"He really sees how the moving parts connect," said Bernstein, who has advised Obama in the past. "That's exactly what you want if you're president — someone who can help explain if you press here, what might happen over there."
Several outside experts said they expect the National Economic Council, based inside the White House, to become much more of a power center under Summers than it has been in recent decades.
"It's going to be a very, very strong position," said Maya MacGuineas, of the Committee for a Responsible Federal Budget.
Sen. Judd Gregg, R-N.H., top Republican on the Senate Budget Committee, rendered perhaps the highest praise by comparing Geithner and Summers to the sluggers who once formed the heart of the order for his beloved Boston Red Sox.
"He's basically signed up Manny Ramirez and David Ortiz," Gregg said. "They're extraordinarily strong nominees."
Who's who on the economic team
President-elect Obama's economic team:
Source: USA TODAY research