Fisher Investments Editorial Staff
US Economy

Meet Mr. Geithner?

By, 01/23/2009

Story Highlights:

  • The Senate Finance Committee approved the nomination of Timothy Geithner as Treasury secretary Thursday—sending it to a full Senate vote.
  • Investors should pay attention to the appointment. Since last fall's financial panic, the position has more power to affect markets than in the past.
  • But so far, Mr. Geithner, like any good political candidate, has managed to say relatively little. The proof, as they say, will be in the pudding.

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Political appointees subject to Senate approval tend to speak in broad generalizations—like a fortune cookie predicting financial opportunities in the coming year. Chances are most will have some experience that fits the prediction, and even better, it's just what they want to hear.

That's not to say confirmation hearings are always a walk in the park, but besides a minor tax scandal, the Senate Finance Committee's Thursday approval of Timothy Geithner's nomination for Treasury secretary was pretty close. The next step will be a full Senate vote late this week or early next. Most senators seem willing to overlook the tax issue, citing economic urgency, while none have yet voiced notable dissent over Geithner's credentials or ability.

Historically, the post of Treasury secretary, compared to the Fed head for instance, has been mostly insignificant to markets. But given recent trends, the incoming Treasury secretary could wield market-moving powers for the foreseeable future.

So who is Tim Geithner and what can we expect from him? We know Geithner headed up the New York Federal Reserve Bank for the last six years. And he was a key adviser to Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson during recent government interventions in financial markets—the AIG, Fannie, and Freddie bailouts, as well as TARP planning and execution.

Beyond that, not much else of consequence has been unearthed (not for lack of trying), and Mr. Geithner handled Senate questioning as is probably most appropriate for a political appointee —from 10,000 feet. For instance, he said he would "reshape and redesign" the financial rescue, while simultaneously arguing the Treasury and Fed's actions thus far helped prevent "a ‘catastrophic' collapse of the financial system." He also claimed to back firmer financial sector regulation (of course he does), saying the Federal Reserve hasn't effectively overseen commercial bank risk. And he believes housing market stabilization has so far been "inadequate" (a popular view in Congress, and not one likely to alarm those voting for him) and the administration would evaluate proposals, including one to set mortgage rates at 4.5%. It's likely all these statements are true—but they leave plenty of room for him to maneuver once he assumes his post.

What does it all mean? Simply, it shows Geithner, like any good political appointee, has thus far managed to say relatively little. The proof, as they say, will be in the pudding. And as long as it remains the Treasury's jurisdiction to spend hundreds of billions in TARP money and support the banking sector, the Treasury secretary can certainly influence markets. So, we may have yet to meet the real Mr. Geithner, but investors should keep an eye on how the next Treasury secretary conducts himself—you can bet markets will.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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