Leaking Geithner: Good News for Currencies, Markets

by: Kathy Lien November 21, 2008    

Kathy Lien

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On a day when the market had nothing to be happy about, the leak of President-elect Barack Obama’s Cabinet announcements have erased one major uncertainty for the financial markets, helping equities and currencies recover. The NY Times reports that Hillary Clinton has accepted the post of Secretary of State and NBC reports that Timothy Geithner will be named Treasury Secretary.

When compared to the vast experience of Lawrence Summers and Paul Volcker, Geithner is definitely the more spirited choice. In order to command the same respect that Summers and Volcker may have instantly received from Wall Street, Geithner will have to hit the ground running at an unusual pace to reassure investors. The benefit of choosing Geithner is that he has been intimately involved with the current financial crisis from Day 1. There will be continuity and no need for any major transitions.

In order for the financial markets to hold onto their gains, Geithner will have to work with Paulson and Bernanke immediately to figure out the best ways of using the second half of the $700B bailout package.

Here is more information on Geithner:

Timothy Geithner has been serving as the President and Chief Executive Officer of the Federal Reserve Bank of New York since 2003. Up until the latest financial crisis, he has been relatively unknown, especially when compared to Summers and Volcker. However, he has been instrumental in helping Hank Paulson resolve the current financial crisis, first by brokering the JPMorgan Chase (JPM) acquisition of Bear Stearns. Since then he has called for overhauling the regulation in the financial industry, been intimately involved in the government’s decision to let Lehman Brothers fail, and played a key role in the dispute between Citigroup (C) and Wells Fargo (WFC) over Wachovia.

Geithner is also a protégé of Lawrence Summers and has been involved in the bailouts of Brazil, Mexico, Indonesia, South Korea and Thailand in the 1990s as the Undersecretary of the Treasury. He has far fewer enemies than Summers and works well with both Republicans and Democrats. Geithner is credited with warning Wall Street banks in 2006 and 2007 to figure out what would happen to their portfolios if one of their main competitors failed. He was worried about the smoke and mirrors that complex credit derivatives can have on balance sheets. Geithner’s only shortfall is that he has worked too closely with Paulson in resolving the current financial crisis, which has both strong supporters and critics.

This is an incredible opportunity for Geithner because the challenge that lies ahead is one that will cement a reputation for decades to come and we wish him good luck!

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This article has 13 comments:

  •  
    Nov 22 05:24 AM
    After seeing the title I thought I was going to find out why his appointment was good for currencies and markets but I guess I missed something.
    Reply | Link to Comment
  •  
    Nov 22 08:39 AM
    Putting the guy who brokered the Bear Stearns fiasco in charge of the Treasury will probably be a disaster for future generations of taxpayers and dollar holders.

    After all that talk of "change" what we're really getting is "more of the same."
    Reply | Link to Comment
  •  
    Nov 22 09:48 AM
    Lets set up a drink and grab a smoke ...
    We finally have the one man who can fix this financial mess !
    NOT
    Reply | Link to Comment
  •  
    Nov 22 10:35 AM
    Lawrence Summers and other Bill Clinton "boys" are good. They
    - Strongly supported and promoted financial derivatives
    - Strongly supported and promoted financial & corporate fraud and thievery
    - Strongly supported and promoted various bubbles including the Internet one
    - Strongly supported and promoted de-industrialization of America destroying the America industrial base
    - Strongly supported and promoted development of Chinese economy that about to screw America to its foundation

    As for Timothy Geithner, he was the most instrumental in the latest Wall-Street catastrophe.

    All these people have perverted vision of America and no courage.
    Reply | Link to Comment
  •  
    Nov 22 10:41 AM
    Anyone that thinks this Paulson clone is going to solve our economic crisis is dreaming. He is known as someone that is willing to break the rues just to make a deal and therefor is a Wall Street darling for shrugging regulation and then bailing them out. Anyone who believes leaking his name caused the markets to surge Friday also knows nothing about markets and probably have never heard of volatility on options expiration days and short squeezes. The tend is down and will not change for a long time.
    Reply | Link to Comment
  •  
    Nov 22 11:02 AM
    Just what we need, another Federal Reserve man in charge. They've sure done wonders for our currency and economy so far.

    All we will see happen is:
    -More manipulation of the currency
    -More bailouts
    -More printing of the money
    -Less oversight over our currency, and less transparency.
    -More power in the hands of the Fed. Now we can't investigate them or know where the bailout money all went... this will only get worse.
    -More bubbles and busts (and emphasis on bust!), both caused to be larger and more severe by manipulation and delaying natural cycles.
    -Delaying the inevitable cycles only hurts America and Americans more in the end - Look at where we are now!
    -More government debt.
    -More inflation. It will kick in. You will see. The short-term threat of deflation is nothing compared to the long-term threat of inflation we will see.
    -A lower USD.

    This isn't change for the better. This isn't even change. This is more of the same. Ron Paul espoused real change by reverting back to the true capitalist system (Austrian School of Economics style) that brought us our initial wealth, not the socialism that has squandered it for decades while unfairly blaming capitalism (which hasn't been practised for a long time!)!

    Woot for more manipulation. LMAO.
    Reply | Link to Comment
  •  
    Nov 22 11:20 AM
    I'm sorry, but I fail to see how bringing this fellow in will "change" anything.
    Of all the incredibly intelligent economist in this country....Obama reaches into the same bag of tricks.
    One good thing about the developements as they are unfolding......our "yes we can"..."hope... man is proving himself to be yet another cookie-cutter b.s artist a tad faster than Clinton.




    Reply | Link to Comment
  •  
    Nov 22 11:44 AM
    This "news?" (Hype) was leaked an hour before the market closed. I found it interesting that the market was selling down (as it should) until this BS hit the street. I can not help but wonder how many "Cronies got the word that this would be leaked so they could get "LONG" at the bottom. I am pretty damned sick and tired of this market manipulation by the poiticians and their freinds. This stuff should not come out until the market closes, just like major corporation news. How about it folks??
    Reply | Link to Comment
  •  
    Nov 22 01:38 PM
    I agree with fredissy and would like to add that major corporation news also comes out after the cronies buy in.
    Who says crime doesn't pay.
    Reply | Link to Comment
  •  
    Nov 22 04:07 PM
    Despite everything Paulson and Geithner have done to date credit markets are tight and getting tighter again. Paulson now exacerbates our financially perilous state by deciding not to use the last $350 billion before leaving office January 20? This man is a mental case.

    Nationalize the banks, forget about the bank investors, create a new National Bank of the United States which will make the loans and liquify the markets the spineless crooks in the banking profession won't do.
    Short of that, the President elect is facing a Bush induced revolution, food riots, and a social melt down which makes the burnings in cities of the 1960s look like a child's birthday party.
    Reply | Link to Comment
  •  
    Nov 22 07:45 PM
    Jim Rogers calls this guy a clown, I believe Jim Rogers over anyone else.
    Reply | Link to Comment
  •  
    Nov 23 10:14 PM
    Change , my a** !
    More of the same BS ! Athelstan , you are correct . !960"s burning of cities will seem like xmas eve . Why do you think they have " martial law " ready to go ? It's called meltdown .
    Reply | Link to Comment
  •  
    Nov 24 02:08 AM
    This is just the latest talking head to be trotted out. This is the game they played 1929-33 as well: just keep putting one pundit after another out there telling us how we need more "confidence" which is code for "borrow more money".

    But the boom is bust and bust it will be for at lease 18-24 more months or until all stocks revert to at least their 1995 price or worse. Just remember, credit reflating requires that credit be available (they are working on this one still) and that people actually accept the credit and consume more. This is a difficult thing to do when lay offs are increasing. Forget the official 10% layoff cap they are throwing around. It will be 15% at least before this is over and across the board salary cuts of 20% or more for those who remain working because that's simply what happens in a deflationary crash.
    Reply | Link to Comment
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