The Hope and Change Cabinet: Treasury Secretary

The Contenders:

Larry Summers

Lawrence “Larry” Summers followed one of his mentors, Robert Rubin, as President Clinton’s Treasury Secretary.

He was born in 1954 in New Haven, Connecticut. His parents and an uncle were all noted economists, so you could say that he has it in his blood. He attended MIT and Harvard, where he earned Bachelors and Doctorate degrees in economics, respectively. He taught at both of his alma maters before moving to Washington to work on President Reagan’s economic staff.

Make no mistake, though. He is a democrat at heart. He worked on the Dukakis Presidential campaign in 1988. During the Clinton years, he served as Chief Economist at the World Bank, then Undersecretary and Deputy Secretary of the Treasury before becoming Treasury Secretary himself. After Clinton’s departure, Summers returned once again to Harvard, this time as its President.

His mentors include Martin Feldstein of Harvard, Robert Rubin, and Alan Greenspan.

While President of Harvard University, Mr. Summers made several remarks about affirmative action, the relative abilities of men and women in the sciences, and the tendency of liberal colleges at the time to divest from holdings in companies in Israel. He also had a long-standing feud with the liberal members of the campus. His comments and opinions so inflamed fury on the left that he was eventually forced to step down from his post as President. Many still hold a grudge against Summers for this ugly period of disagreement.

Larry Summers is a strong advocate for free trade and globalization. He is experienced, having held the post of Treasury Secretary before, and having an impeccable academic and career resume. He is reasonable and pragmatic, and appears to be loyal and honest to a fault.

MOCKBADOC feels that he would make an acceptable Treasury Secretary.

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Sheila C. Bair

Sheila C. Bair is a 54-year-old Republican attorney specializing in Financial Regulatory Policy. She has taught this subject at the University of Massachusetts Amherst since 2002. She is currently the Chairwoman of the FDIC. She was named the second most powerful woman in the world by Forbes magazine earlier this year.

Long before it was widely realized, Bair was sounding the alarm on the unthinkable lending practices of American banks stemming from the Clinton-era Community Reorganization Act, bank intimidation, and the irresponsibility of the now-seized IndyMac, FreddyMac and FannieMae.

The recent sinking of the American banking industry, however, has sucked down the good with the bad, and Bair’s critics allege that she was weak and inconsistent in the stabilization of some banks and not others.

Although a capable and intelligent pick, Sheila Bair seems an unlikely choice given recent events. Despite her blamelessness in the fiasco, the fact that she was at the helm as the ship capsized will likely ruin her chances. She also lacks the kind of experience she will likely need as Treasury Secretary in these highly-charged times. The new SecTreas will need to be tough, perhaps even mean, to drive us out of this mess, and Bair is untried so far as I can tell.

MOCKBADOC thinks there may be better choices for the job of Treasury Secretary.

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Timothy Geithner

The odds-on favorite so far is 47-year-old New Yorker and international business expert Timothy Geithner. He is the current President of the Federal Reserve Bank of New York. He holds degrees from Dartmouth College and Johns Hopkins, and has studied Asian culture and business and has lived and worked abroad for several years. He is the consummate financial industry insider, having worked at several high-profile firms and in government. He has worked in the International Affairs division of the Treasury Department, and was even named Undersecretary of the Treasury for International Affairs, a post in which he worked under both Robert Rubin and Lawrence Summers (already mentioned).

He left U.S. Government when Clinton did, and spent his time at the Council on Foreign Relations and the International Monetary Fund.

Recently, as President of the New York Fed, his reputation was stained as a result of the collapse of the venerable Big Apple Financial firm Lehman Brothers and was intimately involved in the plan to bail out their rivals Bear Stearns and AIG.

It is unclear how Geithner could use his experience to chart a course out of our current mess. His history suggests a predisposition toward internationalism, which may actually undermine our efforts to stabilize our own economy. Like it or not, the international economy takes its lead from ours.

Still, he is young, energetic, and probably very attractive as a working partner to the equally young and untested Obama. He is definitely one to watch, but…

MOCKBADOC thinks Geithner lacks the gravitas to drive the bus during these troubled times.

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Paul Volcker

The final name commonly mentioned for Treasury Secretary is Paul Volcker, the 81-year-old New Jersey native, considered the “elder statesman” candidate for the job. Mr. Volcker holds degrees from Princeton, Harvard, and the London School of Economics. He worked as an economist with the New York Fed and Chase Manhattan Bank before a brief stint with the U.S. Treasury Department as an analyst from 1962 to 1963. He returned to Chase Manhattan Bank only briefly before once again working for the Treasury Department, this time as the Undersecretary for International Monetary Affairs.

Volcker is a life-long Democrat, and was appointed by Jimmy Carter to head the U.S. Federal Reserve Bank in 1979. He was reappointed by Carter’s successor, Ronald Reagan, under whom he served in this capacity nearly until the end of Reagan’s second term.

During his time at the Fed, Volcker was able to reduce inflation from a high of over 13% in 1981 to just over 3% in 1983. The aggressive actions taken by Mr. Volcker, including limiting the supply of money and largely abandoning the practice of targeted interest rates did have a flip side, however, and produced extremely high unemployment. This caused him to be subjected to very significant criticism.

Mr. Volcker left government in 1987, and lived relatively quietly, with the exception of his criticism of the son of UN Secretary General Kofi Annan after he discovered improper financial relations between Kojo Annan and a Swiss bank in his work as a special investigator into allegations of corruption in the world body.

While Volcker certainly has the experience and the pedigree to run the Department of the Treasury, one wonders whether this 81-year-old economic heavyweight may have fought his best fight in the early 1980s. If John McCain was too…er…”erratic” for the Presidency according to the Obama campaign, Volcker may suffer from the same malady.

MOCKBADOC thinks that Paul Volcker would make a superb advisor, perhaps even Chief Economic Advisor, but shouldn’t be named Treasury Secretary.

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Final analysis and prediction:

While all four contenders have their strengths, two of them are felt to be hopelessly entangled in the sub-prime mortgage mess, and one seems to be in the Autumn of his career. Only one of the four has the pedigree, the temperament, the experience, and the guts to have a chance to get us out of this mess.

MOCKBADOC predicts that the Hope and Change Treasury Secretary will be Lawrence “Larry” Summers.