Obama's Biggest Decision

Tue, Nov 11 02:30 PM

Liz Moyer, Forbes.com

Three days after the election, pressure is mounting on President-elect Barack Obama to name his Treasury secretary and other key economic advisers.
Obama gathered his economic advisory board Friday in Chicago and in the afternoon held his first post-election press conference, at which he said the Cabinet picks will be made with deliberate haste. Still, he did not put forward a name.

The meeting came the day the government announced unemployment has reached a 14-year high of 6.5%, with 240,000 jobs cut in October, up from 6.1% in September and higher than the worst point of the 2001-03 recession. On Thursday, major U.S. retailers reported double-digit sales declines for October.
Obama said Friday that the economy is in "bad shape," and his initial goal as president will be to boost jobs and restore confidence. A fiscal stimulus plan will be part of that, he said.

Selecting the economic and financial advisers to steer him through an undoubtedly rocky first few months is the most important decision facing the president-elect. The next Treasury secretary inherits a badly shaken financial system, a mandate to rein in Wall Street's excesses, and hundreds of billions of dollars' worth of risky new programs ginned up by the current president to stop the bleeding.

Some of the people thought to be under consideration for the post are scheduled to attend the meeting Friday, including former Treasury secretaries Lawrence Summers and Robert Rubin, business professor and former head of the Council of Economic Advisers Laura Tyson and former Federal Reserve Chairman Paul Volcker.Berkshire Hathaway whom bookmakers had given short odds for the Treasury post before the election, will phone in.
Conspicuously absent from the list of attendees is Timothy Geithner, president of the Federal Reserve Bank of New York. He, along with ex-Treasury secretary Summers, are thought to be the front-runners for the job.
Obama's task in choosing a Treasury secretary is complicated by the situation on Wall Street.

The government is taking a direct $250 billion stake in the U.S. banking system by injecting banks with capital. Because all of the nine major U.S. banks, as well as dozens of regional and smaller banks, are participating, picking a banker could raise criticism that Obama is putting a fox in charge of the hen house.
There are plenty of bankers whom he could call in, though many of them are alumni of Goldman Sachs, where current Treasury Secretary Henry Paulson came from. That, of course, would prompt criticism from conspiracy theorists about Goldman's backroom influence in Washington.

Rubin, a former Goldman president and current Citigroup board member, has been mentioned as a possible candidate, but he has played down any interest in joining a new administration. He served as Treasury secretary under President Clinton. Longer-odds possibilities include Merrill Lynch, and Jon Corzine, currently governor of New Jersey.

JPMorgan Chase, has been mentioned as a heavy favorite in recent days. JPMorgan is taking money through the Treasury's capital plan, but the diverse commercial bank company has endured the credit crisis relatively well compared with others.

Dimon was called to aid in the rescue of Bear Stearns earlier this year and the takeover of Washington Mutual's assets and deposits after its collapse in September. He was at the table when regulators and fellow bankers discussed the fates of Lehman Brothers and American International Group.
He also has an Illinois connection: He turned around Chicago-based Bank One before selling it four years ago to JPMorgan Chase. A JPMorgan spokesman had no comment.

It's easy to draw links between Obama and JPMorgan, mostly through William Daley, the former commerce secretary, the brother of Chicago's Mayor Daley and the head of JPMorgan's office of corporate social responsibility. On Wednesday, Daley was named to Obama's 12-person transition team, and he will be at the meeting Friday