President-Elect Obama unveiled his economic team today, starting with naming a new Treasury Secretary. New York Federal Reserve Bank Chief, Tim Geithner will take over for Hank Paulson as the US Treasury Secretary, and this news couldn’t come a moment to soon for the US stock market which had been in a virtually freefall all last week
In Geithner, we have a brilliant economic mind, who’s an academic, not a Wall Street guy. He’s worked in the Treasury since the 80s and was also a Senior Fellow with the Council on Foreign Relations. He’s known to be a pragmatist and he’s known to be assertive. Moreover, he represents change. A brilliant youthful mind who is ready to experiment with solutions to the financial crisis sounds like something the American public can get behind. He also enjoys the confidence of both the academic economic community and the business community. With Larry Summers as the head of the National Economic Council, he’ll be flanked by arguably the greatest economic mind in the country. Geithner is known as a tough regulator so it looks like he might be the right person to help fix some of the systemic problems on Wall Street. His academic background also makes him uniquely suited to think creatively about solutions to our current crisis. This appears to be a good move by President-Elect Obama.
I’m not an economist, but I recently completed a course in international finance and I’ve come to learn one thing about how the economy works. Much of it is psychological. The market itself is merely the manifestation of the relationship between how we collectively feel about our situation and how we express that as consumers. Indeed deficits and bad business practices which erase wealth are real, but how we react to that information is where the real damage occurs. Things that instill confidence in the average American serve to strengthen the economy. That may be oversimplifying it a bit, but it seems to make sense to me.
Nothing instills confidence like having a job, and President-Elect Obama has announced he wants to create 2.5 million jobs by 2010. Now that could just be rhetoric, but today, we found out that Summers and Geithner are the ones responsible for figuring out how to make that happen. Indeed, this appears to be the beginning of a serious plan to jumpstart our economy and restore confidence to our financial system, and Americans can feel confident in the abilities of these two men.
This looms large in the face of President Bush’s irrelevance on the economy. It appears he’s checked out a few months early.