Obama picks Geithner for treasury secretary post

Faced with a historic financial crisis that will define the early days of his term, U.S. president-elect Barack Obama unveiled his economic team Monday, highlighted by the appointment of New York Federal Reserve head Timothy Geithner as his future treasury secretary.

President-elect Barack Obama introduces his economic team during a news conference in Chicago on Monday. From left are treasury secretary-designate Timothy Geithner, Council of Economic Advisers chair-designate Christina Romer, and National Economic Council director-designate Lawrence Summers. (Pablo Martinez Monsivais/Associated Press)

Obama made the announcement at a noon news conference in Chicago.

"Having served at senior roles at Treasury, the IMF and the New York Fed, Tim Geithner offers not just extensive experience shaping policy and managing financial markets, he also has an unparalleled understanding of our current economic crisis in all of its depth, complexity and urgency," Obama told reporters.

"Tim will waste no time getting up to speed."

Obama named Lawrence Summers, treasury secretary in former president Bill Clinton's administration, as his choice for head of the National Economic Council. Summers, 53, will serve as chief economic adviser to Obama.

"Larry helped guide us through several major international financial crises, and was a central architect of the policies that led to the longest economic expansion in American history, with record surpluses, rising family incomes and more than 20 million new jobs," said Obama.

Announcement thin on details

Obama said the country was facing an "economic crisis of historic proportions," and that the new economic team's work "starts today."

"The truth is we do not have a minute to waste," he said.

Obama did not elaborate on a Saturday announcement where he said he will introduce an economic recovery plan that aims to save or create 2.5 million jobs over the next two years.

Obama would not put a number on how much his plan would cost taxpayers, but said there is "consensus across the political spectrum that we need a stimulus."

"Now, it's going to be costly, and one of the things that we know already is that even if we did nothing further for the remainder of this year, we're going to see a substantial deficit next year, bigger than we've seen in a very long time," he said.

Democratic lawmakers had speculated the package could be in the $700 billion US region.

What is certain is that the plan is likely to far exceed the $175 billion US proposed by Obama to stimulate the economy during the election campaign. It would include an infusion of money for infrastructure projects, new environmental technologies and tax cuts for low- and middle-income taxpayers.

Obama called on the new Congress to act quickly in passing his stimulus package.

"Most experts now believe that we could lose millions of jobs next year," he said, urging the newly elected Congress to act quickly on his plans after opening its session on Jan. 6.

Obama critical of automakers

When asked about the appearance of representatives from Detroit's Big Three auto manufacturers at congressional hearings last week, Obama said he was "surprised" the automakers didn't come with a better-thought-out proposal.

Congressional leaders decided last Thursday to cancel a vote on whether to give General Motors Corp., Ford Motor Co. and Chrysler LLC a $25-billion US bailout. All three automakers came under withering criticism from lawmakers of all stripes for failing to propose a convincing plan on how to rebuild their crumbling industry.

It's possible Congress could vote on the bailout again in early December.

"I think Congress did the right thing, which is to say, 'You guys need to come up with a plan and come back before you're getting any taxpayer money,'" he said, adding taxpayers can't be expected to write a blank cheque for an industry that has been "resistant to change."

But Obama said the auto industry historically has been the "backbone of America's manufacturing base," while the survival of the vast network of businesses connected to the automakers is also at stake.

GM, Chrysler and Ford employ close to 250,000 people in the United States and supporters claim they touch more than four million other jobs at suppliers, dealers, car haulers and rental companies.

"I've said before and I will repeat, we can't allow the auto industry simply to vanish," he said.

"What we should expect is any additional money that we put into the auto industry, any help we provide, is designed to assure a long-term sustainable auto industry and not just kicking the can down the road," he said.

Tax hike for wealthy hinges on advice from economic team

Obama said he will provide tax cuts for "vast majority" of Americans and increase taxes on those making more than $250,000.

"Whether that's done through repeal or whether that's done because the Bush tax cuts are not renewed is something that my economic team will be providing me a recommendation on."

The Bush cuts are due to expire in 2011. If Obama chooses to let the tax cuts expire instead of rescinding them sooner, he could face criticism for stalling on a campaign promise to hike taxes for wealthier Americans.

John Boehner, the House Republican leader, speaking to Fox News on Sunday, urged Obama to make explicit his tax plans for wealthier citizens.

"Why wouldn't we have the president-elect say, 'I am not going to raise taxes on any American in my first two years in office?"'

Geithner the key player

Geithner, head of the Federal Reserve Bank of New York, will play a key role in implementing any new economic policies.

President of the New York Federal Reserve Timothy Geithner, left, speaks to Federal Reserve Chairman Ben Bernanke at an event at the Economic Club of New York in this October file photo. (Mark Lennihan/Associated Press)

Geithner, 47, served as a Treasury Department official during the Clinton administration, where he played a major role in negotiating assistance packages for South Korea and Brazil.

Soon after his name was linked to the top economic job, in a leak on Friday, U.S. stocks rose sharply, with the Dow Jones industrial average spiking by 500 points on the news.

"This guy's well liked by Wall Street," Hunter said.

"Most importantly, lately he's been involved in a lot of the … financial institution bailouts. He was involved in the AIG bailout and coincidentally, importantly, significantly, he was involved in the Citibank bailout talks late last week and into the weekend."

Obama also announced Christina Romer, a professor at the University of California, Berkeley, would serve as head of the White House Council of Economic Advisers.

The three-member council makes recommendations to the president on policy options. Along with the director of the National Economic Council, the chair plays an influential role in crafting the president's policy plans.

Melody Barnes will serve as director of the Domestic Policy Council, where she will work on health-care issues and education, Obama said.

Barnes became senior domestic policy adviser to the Obama campaign in June. Prior to that, she was the executive vice-president for policy for the Center for American Progress, a policy think-tank. She was also counsel to veteran Democratic Senator Ted Kennedy.

Also on Monday, a successor was chosen to fill the Delaware Senate seat left open by vice-president-elect Sen. Joe Biden, who takes up his position as vice-president alongside Obama in January.

Edward Kaufman, who served on Biden's Senate staff between 1973 and 1994 and is an advisory board member of Obama's transition team, was appointed by Delaware Gov. Ruth Ann Minner on Monday.

With files from the Associated Press, Reuters