Treasury Secretary Important Pick For Obama

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The faltering economy is the immediate priority for President-elect Barack Obama. Many are waiting to see whom he will pick as the new treasury secretary. He'll also be working on an agenda to stimulate the economy that's likely to include infrastructure projects and financial assistance for states.

STEVE INSKEEP, host:

It's Morning Edition from NPR News. I'm Steve Inskeep.

RENEE MONTAGNE, host:

And I'm Renee Montagne. For two and a half months, the president of the United States remains George W. Bush. But many are looking to his replacement for action now.

INSKEEP: That's especially true when it comes to the economy. And President-elect Barack Obama is likely to get involved before he takes over the Oval Office. Here's NPR's John Ydstie.

JOHN YDSTIE: Even before all the votes were counted, pundits began calling on President-elect Obama to name his Treasury secretary to try to boost confidence. Former Clinton administration economic official and Federal Reserve Vice Chairman Alan Blinder says given the country's dire economic straits, naming a Treasury secretary quickly is a good idea.

Dr. ALAN BLINDER (Professor of Economics, Princeton University): The new secretary of the Treasury is going to have to hit the ground running with unusual speed. I mean, I guess that's a cliche you could say about any administration. But in this case, I'm pretty sure he's going to have to hit the ground running before he's secretary of the Treasury.

YDSTIE: Blinder says he believes the choice should be made within a couple of weeks. An economic advisor to Obama who didn't want to be named says that's a likely timeframe. The advisor would not discuss names, but several current and former government officials are reportedly under consideration. Former Clinton Treasury Secretary Larry Summers tops the list, followed by the current president of the New York Federal Reserve Bank, Tim Geitner, who's been deeply involved in the government's response to the financial crisis. Also on the list is former Federal Reserve Chairman Paul Volcker. Blinder, now a professor at Princeton, thinks Obama should appoint the elderly but well-respected Volcker, who's given Obama advice during the campaign.

Dr. BLINDER: To have a giant like Volcker at the helm for a year or so at the beginning of what's going to be a tumultuous period, I think would be very reassuring to everybody.

YDSTIE: Among the things Obama's nominee could do immediately would be to influence the use of the $700 billion financial rescue plan being managed by Treasury Secretary Henry Paulson. Alan Blinder says he thinks Obama should try to focus the plan more directly on helping struggling homeowners, something Obama campaigned for. Peter Morici, a University of Maryland economics professor, says given the rescue plan's focus on strengthening the banking system, the new Treasury secretary should come from a banking background.

Dr. PETER MORICI (Professor of International Business, University of Maryland): Someone who understands banking and has had a hand in national banking policy, perhaps through the regional Federal Reserve. But we certainly don't want someone from Wall Street like Bob Rubin or Henry Paulson because they seem to be too much captive of the system. They're not willing to take the tough choices and tell the bankers they can't pay themselves $10 million a year to make loans.

YDSTIE: The other economic issue that can't wait for inauguration day, according to both Morici and Blinder, is a second stimulus package. The House passed a second $61 billion plan in late September. It included aid to states and money for infrastructure projects. But it was blocked by Republicans in the Senate. House Speaker Nancy Pelosi said yesterday she hoped to take it up again in a lame-duck session of Congress within a couple of weeks.

Pelosi and Obama have consulted on the package. According to an Obama adviser, the president-elect would like to get another stimulus bill done quickly, but also wants the right package. Alan Blinder says the situation is too urgent to wait for the inauguration and a new Congress.

Dr. BLINDER: The smart approach would be a one-two punch, which is get what you can with the Republicans in their current position, including controlling the White House, and hold over the things that the Republicans will resist for a stimulus bill in, say, February.

YDSTIE: Beyond emergency measures, President-elect Obama has a long list of economic initiatives from health care reform, to support for alternative energy, to cutting taxes for the middle class. Obama's proposed tax hike on high income Americans, which would go into effect in January of 2010, could be counterproductive if the economy is still weak. The Obama adviser who spoke with NPR said there's no plan yet to put off that tax hike. The source didn't rule out a delay, though, saying the economic team has been so focused on winning the election, it hasn't had time to adjust economic proposals that were designed in a very different economic environment. John Ydstie, NPR News, Washington.

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