Clinton is choice for State Dept.
Obama plans to tap rival; markets soar on news of Treasury pick
WASHINGTON - President-elect Barack Obama is all but certain to appoint former rival Hillary Clinton to be his secretary of state, an Obama aide confirmed yesterday, and will reportedly name Timothy F. Geithner, president of the New York Federal Reserve Bank, as his Treasury secretary, the key Cabinet post responsible for confronting the surging economic crisis.
The stock market soared in the final hour yesterday when news emerged that Obama would appoint Geithner and other top members of his economic team as early as Monday, a signal that he wants to establish his team quickly to try to stem the economic free fall. Obama also is expected to appoint Lawrence H. Summers, the former Harvard president and Treasury secretary, as a senior economic adviser.
Obama and Clinton, who battled fiercely for the Democratic nomination, have worked out the final terms, and Obama plans to announce her appointment after the Thanksgiving holiday, according to the aide, who works on the presidential transition team but did not want to be identified because he does not have authority to speak on the record about the matter.
A key stumbling block over Clinton's appointment - full disclosure of former President Bill Clinton's finances and his international dealings - has been resolved, according to the aide, and the president-elect and Senator Clinton are "in good, substantive conversations" as the remainder of the national security team is selected.
Reports that Obama had settled on Geithner triggered a dramatic rally on Wall Street and elicited praise from a range of lawmakers, bankers, and lobbyists. Most hailed the 47-year-old Geithner's capability, his calmness under pressure, and his cre ative approach to problem-solving.
"I think it's a great appointment," said Barney Frank, Democrat of Newton, the chairman of the House Financial Services Committee. "There'll be a smooth transition, but there'll be a change" on national economic policy.
Because Geithner has been involved in the $700 billion Wall Street rescue package, "there'll be a lot of continuity," Frank said. "He's been in it. He was a formulator of it."
News reports also said that Summers - a senior Obama adviser, a former Treasury secretary under President Clinton, and past president of Harvard University - would become a senior White House economic adviser. The New York Times reported that Summers, who had been a front-runner for the Treasury post, would be in line to succeed Ben Bernanke, the chairman of the Federal Reserve Board, when his term expires in 2010.
"I think this is pro-Geithner and not anti-Summers," Frank said.
Another former Obama rival for the nomination, Governor Bill Richardson of New Mexico, was reported to be in line for the post of commerce secretary. That would bring a Latino into the Obama Cabinet.
The reports about Clinton and Geithner capped a week of speculation about Clinton and a flurry of reports about Obama's Cabinet - most attributed to leaks by senior advisers or transition officials, a sharp contrast to Obama's "leak-proof" presidential campaign.
An Obama campaign adviser close to the transition team told the Globe yesterday that the president-elect is apparently focusing on retired Marine Corps General James Jones as his national security adviser. If selected, Jones - a widely respected officer and former Marine Corps commandant who led NATO forces in Afghanistan - would indicate that Obama intends to keep his campaign promise and make the worsening situation in Afghanistan a top military priority.
The Clinton and Geithner selections would also signal that under Obama, the United States is looking to work more closely with the international community.
As first lady, Clinton traveled extensively and gained worldwide recognition. Geithner speaks Chinese and worked at the International Monetary Fund before joining the New York Fed in 2003. He also worked at the Treasury Department under Republican as well as Democratic presidencies.
Javier Solana, the European Union's foreign policy chief, said Clinton as secretary of state would be well received in Europe, especially because her husband remains popular on the continent. "She is a very capable person, whose experience is well known. . . . The name Clinton is well taken."
Choosing her for perhaps his most influential Cabinet post is a dramatic move for Obama, given their long, bitter fight for the Democratic Party's presidential nomination, a battle that sharply divided the party for months. Obama hammered Clinton for her support of the Iraq war, while she said he wasn't ready to lead the nation in an unexpected crisis.
Geithner's resume includes work at Kissinger Associates Inc., the consulting firm of former Secretary of State Henry Kissinger.
On the Federal Reserve board, the president of the New York Fed is considered first among equals, said economist Alan Clayton-Matthews, associate professor at the University of Massachusetts at Boston. Among other things, the New York Fed president is the only permanent member of the Federal Open Market Committee, which sets interest rates, and he is responsible for implementing Fed monetary policy, Clayton-Matthews said.
"The New York Fed is a special bank," he said. "They always have a vote at the table."
Boston University banking professor Cornelius Hurley said the appointment of Geithner would be "a marvelous choice."
Hurley said Geithner is more polished than some other candidates for the Treasury post. "What you're looking for here is a true diplomat and ambassador to the capital markets. And with all due respect to Mr. Summers, diplomacy isn't his strong suit," Hurley said.
Scott E. Talbott, senior vice president for the Financial Services Roundtable, a Washington trade group representing large banks and investment companies, said executives at these firms broadly supported Geithner for the post and tended to favor him over other candidates for the job.
"He's a rock star," Talbott said. "He's got the experience, the resume, and the background. . . . He'll be seen as the right guy."
Connecticut economic consultant Nick Perna, a former head of the research department at the New York Fed, applauded the selection of Geithner.
Perna said Geithner's familiarity with Wall Street and his work on the financial rescue efforts of recent months will give the markets confidence he can negotiate the choppy economic waters.
"I've always been a fan of his, and I've been rooting that President-elect Obama would pick him," said Perna, who teaches banking at Yale University. "He's been in the thick of what's been going on. He doesn't need to be brought up to speed."
Perna said Geithner would be less likely to ruffle feathers at a sensitive time in the economy than Summers and is more familiar with the ins and outs of the banking world than legendary investor Warren Buffett, who was also rumored to have been in the running.
"Warren Buffett is a great adviser, but Tim Geithner knows how all this stuff works from the inside," Perna said. "You need somebody who knows the plumbing, and that's Tim Geithner. This is Tim the Plumber."
Ross Kerber and Bryan Bender of the Globe staff contributed to this report, which also includes material from the Associated Press. 