Nov. 21 (Bloomberg) -- President-elect Barack Obama picked Timothy Geithner, head of the Federal Reserve Bank of New York, to be his Treasury secretary, with Lawrence Summers getting a senior White House role, a Democratic aide said.
Obama is also likely to nominate New Mexico Governor Bill Richardson as Commerce Secretary, and to announce his picks on Nov. 24, the person said on condition of anonymity.
Geithner has helped lead U.S. efforts to combat the deepest financial crisis in seven decades, helping oversee the decisions this year to intervene in American International Group Inc., rescue Bear Stearns Cos. and leave Lehman Brothers Holdings Inc. to fail. Summers was Bill Clinton’s last Treasury secretary, and is now a professor at Harvard University.
Both Geithner and Summers are veterans of managing financial turmoil, having worked together on the Asian financial crisis of 1997-98 and helping prevent a Mexican default earlier that decade. They will be charged with shepherding Obama’s plans for a fiscal stimulus to cushion an economy that analysts say is in its deepest recession in a quarter century.
Geithner, 47, served as an undersecretary for international affairs under Summers, 53, and has served at the helm of the New York Fed since November 2003.
Stocks Rally
Stocks rallied after news of Obama’s choice, with the Standard & Poor’s 500 Stock index rising 5.2 percent to 791.54 at 3:54 p.m. in New York. The index is still heading for its biggest annual decline on record.
Kevin Warsh, a Fed Board governor, is a leading contender to succeed Geithner at the New York Fed, a U.S. official said on condition of anonymity.
As head of the New York Fed, Geithner has served as the central bank’s top liaison with Wall Street. Geithner oversaw meetings at his bank to attempt to head off Lehman’s failure in September, later hosting gatherings on how to resolve AIG.
Geithner is no stranger to Washington or the Treasury. Before taking over the New York Fed in 2003, he spent most of the previous 18 years working in the nation’s capital, first at Kissinger Associates, then at the Treasury and finally at the International Monetary Fund.
Over that time, Geithner earned what his one-time mentor Summers called a “doctorate in financial policy.” He also developed a skill-set his supporters say makes him well suited for his new job: calmness under pressure, an ability to see many sides of a problem and a sense of the politically possible.
‘Calm Guy’
“During the Mexico crisis, some of us would occasionally be emotional about something,” said Jeffrey Shafer, who served with Geithner at the Treasury from 1993 to 1997 and who is now Vice Chairman of Global Banking for Citigroup Inc. in New York. “Tim was the calm guy in the room who made sure we looked at all sides of the issue.”
Geithner, who has studied Japanese and Chinese and has a Master of Arts in international economics from Johns Hopkins University, also played a key role in the Treasury’s dealings with the Finance Ministry in Tokyo. He was less inclined to intervene in currency markets than some other officials at the time, according to Shafer.
Dino Kos, a former New York Fed official, described Geithner as a “pragmatist, not an ideologue” who has a good sense of the political dynamics in Washington and the need to keep lawmakers in the loop about what’s going on. That’s been especially important in the current crisis as the Fed has taken extraordinary actions to limit the financial fallout, including its rescue of insurer American International Group in September.
“If you’re going to push the envelope -- as the Fed has been doing -- you need to keep legislators informed about what you’re doing and why you’re doing it,” said Kos, who’s now a managing director at Portales Partners in New York.
TIM GEITHNER. TREASURY SECRETARY
Personal life
Geithner was born in Brooklyn, New York City, to Mr. and Mrs. Peter F. Geithner of Larchmont, New York. He completed high school at International School Bangkok, Thailand,[1] and then attended Dartmouth College, graduating with a B.A. in government and Asian studies in 1983. After, he obtained an M.A. in International Economics and East Asian Studies from Johns Hopkins University's School of Advanced International Studies in 1985. He has studied Japanese and Chinese and has lived in East Africa, India, Thailand, China, and Japan.
He is married to Carole M. Sonenfeld, a Dartmouth classmate, and with her has two children, Elise and Benjamin.[2] In spare time he fly-fishes, plays tennis and surfs.[3]
[edit] Career
After completing his studies, Geithner worked for Kissinger and Associates in Washington, DC, for three years and then joined the International Affairs division of the US Treasury Department in 1988.
In 1999 he was promoted to Under Secretary of the Treasury for International Affairs and served under Treasury Secretaries Robert Rubin and Lawrence Summers.
In 2002 he left the Treasury to join the Council on Foreign Relations as a Senior Fellow in the International Economics department. He then worked for the International Monetary Fund as the director of the Policy Development and Review Department until moving to the Fed in October 2003.[4] In 2006 he became a member of the influential Washington-based financial advisory body, the Group of Thirty.
On November 21, 2008, it was reported that President-elect Barack Obama had decided to nominate Geithner for the position of Treasury Secretary.[5][6][7]
By Eric Martin
Nov. 21 (Bloomberg) -- U.S. stocks rallied and the Standard & Poor’s 500 Index rebounded from an 11-year low after President-elect Barack Obama picked New York Federal Reserve Bank chief Timothy Geithner to head the Treasury.
“This news could really give the stock market a badly needed shot in the arm,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, wrote in an e-mail to clients. Geithner is a “fantastic choice to help lead the financial markets out of the wilderness.”
Citigroup Inc. pared a 35 percent slide and JPMorgan Chase & Co. trimmed a 16 percent tumble in the final hour as a Democratic aide said Obama will name Geithner to replace Henry Paulson. National-Oilwell Varco Inc. and Chesapeake Energy jumped more than 20 percent as oil rose for the first time in six days. The rally came after this week’s rout dragged the S&P 500’s price-to-earnings valuation to the cheapest since 1995.
The S&P 500, which capped a third-straight weekly decline, gained 6.3 percent to 800.01. The Dow Jones Industrial Average rose 494.37 points, or 6.6 percent, to 8,046.66, while the Nasdaq Composite Index added 5.2 percent to 1,384.35. Almost five stocks gained for each that fell on the New York Stock Exchange.
Benchmark indexes swung between gains and losses earlier as growing concern over the survival of Citigroup offset a rally in commodities producers.
The S&P 500 extended its 2008 slide to 49 percent yesterday and was poised for the worst annual decline in its 80-year history after economic reports depicted a deepening recession and lawmakers postponed a vote on a plan to salvage the auto industry. Citigroup, which has about $2 trillion of assets, has fallen for nine of the last 10 days on concern more companies and consumers will default as the economy worsens.
The benchmark for U.S. equities trimmed its yearly loss to 46 percent today, still the worst year since 1931. The S&P 500 tumbled 8.4 percent this week. The Dow average declined 5.3 percent, while the Nasdaq Composite Index lost 8.8 percent.
EU warns against car subsidy race
 Neelie Kroes believes car makers can use existing EU aid mechanisms |
EU Competition Commissioner Neelie Kroes has told France and Germany not to start a "subsidy race" with the US to save the car industry.
She said the European Union's existing mechanisms could help automakers, hard hit by falling demand.
General Motors has been seeking support from the German government for its local subsidiary, Adam Opel GmbH.
On Thursday the Congress told US carmakers to present a recovery plan if they want a $25bn (£17bn) rescue.
Poorly-handled subsidies would not solve the car industry's problems, Neelie Kroes said.
However, she added that auto makers could benefit from the European Union's funds for research and environment.
European car makers have been reportedly seeking loans of up to 40bn euro (£33.6bn) , at preferential interest rates, to support production.
GM is demanding state aid from the five German states where it manufactures its European brand, Opel, which sells under the Vauxhall badge in the UK.
New car sales in Europe fell by 14.5% in October, the sixth monthly fall in a row, according to Acea, the European carmakers' association.
China deepens Latin America ties
| By James Painter BBC Latin America analyst |
 China has increased diplomacy and investment in Costa Rica in recent years |
China's President Hu Jintao has not been to Latin America since 2005.
But his presence at the Apec summit taking place in Lima this weekend, and his visits to Costa Rica and Cuba, have highlighted China's deepening engagement with the region.
But what exactly is China's interest in Latin America?
President Hu's last visit to an Apec summit in Latin America in November 2004 prompted a flurry of excitement about China's booming economic involvement in the region.
Mr Hu was famously quoted as saying he expected $100bn (£66bn) of Chinese investment in Latin America in the following 10 years.
The Chinese government later corrected this to $100bn in bilateral trade, not investment. That figure was reached sooner than expected last year, and represents a remarkable jump from $13bn (£8.6bn) in 2000.
It still amounts to much less than trade with the US ($560bn) or the EU ($250bn), but the trend is significant. China is buying more and more Latin American commodities like oil, minerals and soya.
 China is purchasing more Latin American commodities like soya |
"China now wants to show it is a responsible stakeholder in the region," says Dan Erikson, a specialist in China-Latin American relations from the Inter-American Dialogue.
"It has the image in Latin America of being 'mercantilist', or only interested in taking out commodities. Now it wants to show it is interested in Latin America's longer-term development."
Crucial partner
China launched its first ever policy paper on Latin America earlier this month. While the document was short on specifics, it aimed to show the world it was serious about the region. It had previously released similar policy papers on the EU in 2003 and Africa in 2006.
As a sign of its long-term intent, analysts point to new free trade agreements (FTAs) between China and individual Latin American countries:
- Chile was the first non-Asian country to sign an FTA with China in 2005
- Peru and China this week successfully concluded talks on a free trade deal
- And a third bilateral deal between Costa Rica and China is under negotiation.
Trade relations have certainly boomed for some Latin American countries since the last Hu Jintao visit. For two of the three Latin American members of Apec, Peru and Chile, China has become a crucial trading partner.
 China and Cuba signed agreements on economical and technical cooperation |
According to UN figures, in 2007 nearly 40% of Chile's exports went to the Asia-Pacific region, mostly China. For Peru, the figure was 19%.
The Peruvian government is keen to deepen trading relations, partly in the hope that China's continued economic growth can help it survive the global recession.
Deputy Foreign Minister Gonzalo Gutierrez described President Hu's visit to Peru - the first ever by a Chinese president - as "of the utmost importance".
However, for Mexico, Latin America's third Apec member, the relative importance of Asia-Pacific remains low (about 3% of its exports) because of Mexico's close ties with the US economy. And the trade that does exist is very much in China's favour.
In 2007 Mexico ran a $28bn trade deficit with China.
"For every $30 of Chinese goods that Mexico imports, Mexico only exports $1 of Mexican goods to China," says Mr Erikson.
Infrastructure
Some Latin American governments complain privately about the low level of Chinese direct foreign investment in the region, which is far less than that of the US or the EU. The official figure is more than $20bn, but critics say much of this goes into offshore tax havens.
According to figures from the Chinese embassy in Washington in early 2008 only about $2bn is direct investment in extractive industries like oil and minerals.
"Investment in infrastructure for example," says Mr Erikson, "has been very disappointing."
Osvaldo Rosales, from the UN's Economic Commission for Latin America and the Caribbean (ECLAC) , told the BBC there was a "huge asymmetry between the increasing level of trade between China and Latin America and the low level of Chinese investment".
But he blames Latin American governments for the lack of properly evaluated investment projects for China to invest in.
Football reward
Analysts say that despite some unease about China's close relations with Cuba and Venezuela, Washington is not unduly concerned about China's growing influence and presence in Latin America.
 President Hu was given a warm welcome by his Peruvian host |
President Hu's visit to Cuba was more about trade and meeting Raul Castro than cocking a snook at the US.
Cuba is also a major ally in a region that usually has diplomatic relations with Taiwan. Eleven of the remaining 23 countries that still recognise Taiwan are found in Central America and the Caribbean.
Eyebrows were raised when Hu Jintao chose to go to Costa Rica rather than say, Brazil, China's largest trading partner in Latin America. But Costa Rica was being rewarded with a presidential visit (and a new football stadium) for its decision last year to recognise China. It is the only Central American country to do so.
Even though China is obviously keen to enter into oil agreements with Venezuela, it has shown it does not want to be drawn into any tension between President Hugo Chavez and the US government.
Washington apparently did not object to China becoming a board member of the Inter-American Development Bank and having observer status at the Organisation of American States (OAS).
"So far, it is widely accepted that China trying to act in the region with self-restraint and prudence," Gonzalo Paz, a lecturer at George Washington University, wrote recently.
"The deepening economic crisis will undoubtedly have an important influence on how the next stage develops."
Global stock markets in 2008
The global financial turmoil seen during 2008 has led to extreme volatility on the world's stock markets.
Below you can see how some of the main global stock indexes have fared during 2008 (graphs update automatically).
Why The Republicans Lost My Vote
After a resounding electoral defeat, in which voters in this once-red state rejected Republicans McCain, Schaffer, and Musgrave, the Colorado Republican Party will undoubtedly be asking themselves, "Why did we lose?"
I want to let them know that they lost the vote of many former supporters (including myself) because they have chosen to embrace the Religious Right.
I voted Republican in 1996, 2000, and 2004. I believe in limited government, individual rights, free market capitalism, a strong national defense, and the right to keep and bear arms - positions that one normally associates with Republicans.
But I didn't vote for a single Republican in 2008. I've become increasingly alienated by the Republicans" embrace of the religious "social conservative" agenda, including attempts to ban abortion, embryonic stem cell research, and gay marriage.
The Founding Fathers correctly recognized that the proper function of government is to protect individual rights, such as freedom of speech and freedom of religion. But freedom of religion also implies freedom from religion. As Thomas Jefferson famously put it, there should be a "wall of separation" between church and state. Public policy should not be based on religious doctrines.
Instead, the government's role is to protect each person's right to practice his or her religion as a private matter and to forbid them from forcibly imposing their particular views on others. And this is precisely why I find the Republican Party's embrace of the Religious Right so dangerous.
If a woman chooses not to have an abortion for reasons of personal faith, then I completely respect her right to do so. But she cannot impose her particular religious views on others. Other women must have the same right to decide that deeply personal issue for themselves.
The Religious Right's goal of outlawing abortions would violate that important right, and sacrifice the lives of actual women for clumps of cells that are only potential (but not yet actual) human beings, based on religious dogma. As a physician, I find that position abhorrent and deeply anti-life.
In his October 24, 2008 radio broadcast, Rush Limbaugh told pro-choice secular supporters of limited government such as myself that we should leave the Republican Party. Many of us have already taken his advice and changed our affiliation to "independent."
The Republican Party stands at an important crossroads. The Republican Party could choose to follow the principles of the American Founding Fathers and promote a limited government that protected individual rights but otherwise left people alone to live their lives.
This includes affirming the principle of the separation of church and state. If they did so, I would happily support it.
Or the Republican Party could instead choose to become the party of the Religious Right and seek to forcibly impose the religious values of one particular constituency over others (thus violating everyone else's rights).
In that case, it will continue to alienate many voters and lose elections -- and deservedly so.
Even though I no longer regard myself as a Republican, I definitely regard myself as a loyal American.
My parents immigrated legally from Taiwan to America over 40 years ago. They had very little money, but they worked hard, sent two children to college and medical school, and are now enjoying a well-earned and comfortable retirement.
Their life has been a real-life embodiment of the American dream. America is a beacon of hope to millions of people around the world precisely because our system of government allows honest, hard-working people to prosper and thrive.
Our system is a testament to the genius of the Founding Fathers, who recognized that the proper function of government is to protect individual rights, such as our rights to life, liberty, and the pursuit of happiness.
Hence, I believe the Republican Party should choose the first path - the path of limited government, separation of church and state, and protection of individual rights.
This is the America that brought my parents from a ocean away in hopes of a better life for themselves and their children. This is the America I want to live in. And this is the America I want the Republican Party to stand for.
Paul S. Hsieh, MD, is a physician in practice in the south Denver metro region and he is a founding member of the Colorado group "Freedom and Individual Rights in Medicine" (WeStandFIRM.org).
Citigroup plunges on uncertainty
 Citigroup's shares have lost half of their market value this week |
Shares in Citigroup, one of the biggest banks in the US, plunged on Friday amid uncertainty about the firm's future.
The firm's stock rose in early trade but later tumbled 28% as investors awaited the outcome of a meeting of the firm's board members.
The Wall Street Journal reported that Citigroup was considering selling parts of the firm. There are also rumours it might merge with another firm.
Earlier in the week the firm announced 52,000 job losses worldwide.
These cuts came on top of previously announced reductions of 23,000 positions.
The total 75,000 job cuts represent a cut of about 20% of its staff, leaving it with 300,000 jobs worldwide "in the near term".
Bank's future
Chief executive Vikram Pundit told employees on Friday that the firm did not want to change its business model, Reuters reported, citing two employees.
Shares in the firm have fallen sharply since the start of the year and are trading more than 80% down since January.
Saudi Prince Al-Waleed Bin Talal's decision to buy about $350m (£236m) of its shares on Thursday did not calm investors' nerves.
The firm insisted on Thursday that it had "very strong capital and liquidity position and a unique global franchise".
But Mr Pandit has come under increasing pressure from critics who doubt his ability to turn around the company and survive the financial crisis.
'Bloodletting'
Citigroup has lost more than $20bn in the past year because of the global financial crisis.
The bank has reported four straight quarterly losses and some analysts believe the bank will not return to profitability until 2010.
Investors are worried that further losses could threaten the bank's future.
"Its fear and panic at this point, " said Gerard Cassidy, a banking analyst at RBC Capital.
Despite the sweeping job losses, the bank has maintained that its underlying business "remains strong and revenues have been stable".
But Jason Goldberg, a Barclays Capital analyst said: "We worry if the lack of investor confidence leads to a lack of customer confidence.
Citigroup is one of nine financial institutions receiving funds from the US government's bail-out programme.
By the Editors
Bailout or bankruptcy? For General Motors, the answer is — yes. But mostly the latter.
There is no saving GM in its present state and no good argument for trying. It is currently losing $500 or more on every car it makes. As of 2007, it was paying its workers at a $20-per-hour premium over what Toyota was paying just down the road. It’s a company with terrible management, terrible unions, and not very many good products. Its shareholders already have been substantially wiped out; there’s very little left for them to lose.
Congress must be reminded to view GM as a car company. It isn’t a health-care provider for the state of Michigan or a federal jobs program, even though members of Congress talk as though it were. The same goes for Ford and Chrysler. Congress is entirely unqualified to evaluate the Big Three as businesses; its members collectively know approximately zilch about the industry, and its own finances make GM look like the gold standard of financial sobriety. Listening to Chuck Schumer describe a business model as “unacceptable,” as he did on Tuesday before specifying his own preference on automotive development, should spook business owners and taxpayers alike. It’s not Congress’s business to evaluate business models.
We have a good, proven process for dealing with companies that have short-term cash-flow problems and valuable underlying assets, and that process is called bankruptcy. There was a reasonable (though not ironclad) case to be made that government intervention was prudent in the case of the bank failures because of the risk of a systemic crisis in the credit markets. There is no comparable argument for GM. There may be a role for the government in softening the landing for GM, perhaps by offering some assistance in securing loans as the company reorganizes, specifically by guaranteeing the DIP — that’s “debtor in possession” — financing that a bankrupt GM would need to restructure its operations (as opposed to having its assets liquidated to pay its creditors).
There is no shame in bankruptcy. It can be a good thing — dozens of companies have entered bankruptcy, reorganized their finances, and emerged stronger than before. Policymakers should endeavor to make use of the time-tested institutions we already have rather than invent new solutions — also known as “making it up as we go along” — whose unintended consequences we must later endure. We have 200 years of bankruptcy law behind us; our Constitution itself touches on the subject: “The Congress shall have power to [establish] . . . uniform Laws on the subject of Bankruptcies throughout the United States.”
GM has real assets — by some estimates, the steel in its buildings is worth more than its current market capitalization of just under $2 billion. GM’s factories, distribution network, intellectual property, and inventory — as well as the expertise of its workforce — are all highly valuable assets. The United Auto Workers are keen on saving their jobs and the $70-an-hour paychecks that go with them, but GM’s payouts to UAW members are one of the major drains on the firm’s future, and a big part of why its market value as a company is less than the value of its buildings and other assets.
While we hope that most of the UAW’s members stay on the job — these highly skilled workers will be needed, whatever happens next — GM’s management has to go. Any taxpayer exposure should be contingent on the exit of every C-level executive from the company, at a minimum.
Shareholders have claims on GM. So do the UAW and its retirees, and so do creditors. The place to work out those competing claims is in bankruptcy court. GM and its taxpayer-funded lobbyist Debbie Stabenow — who moonlights as a U.S. senator — will come with their hands out, telling tales of global financial woe and talking rot about the Big Three’s being essential to national security. But GM isn’t in trouble because of the global credit crisis — it’s in trouble because it’s a poorly run company. If it is essential that American drivers have cars made in America by Americans, there are Toyotas rolling out of Kentucky. GM should roll into bankruptcy court.
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