As President-elect Barack Obama works to put together a new team the focus of the media has largely been on his selection of Secretary of the Treasury. This cabinet office has always been important to the functioning of the government and the financial markets but has generally not generated the interest of say the Secretaries of Defense and State. In the Bush 43 administration, in fact, the holder of that office seemed to be viewed as a mouthpiece for policy formulated by other White House players and very, very expendable.
The first secretary, Paul O'Neil, former president of Alcoa Aluminum was pressured to resign less than two years after his appointment. He had been outspoken in his opposition to the Bush tax cuts - recommending instead a substantial increase - and opposing the invasion of Iraq, maintaining it had been preordained long before the events of 9/11. He also advocated for an investigation of alleged al-Qaeda funding from supposed U.S. allies.
O'Neil was replaced in 2003 by John W. Snow, former president of CSX Corporation. Snow got little respect from senior White House staff and resigned in 2006.
That brings us to the present Secretary of the Treasury, Henry Paulson, who has attracted a good deal of attention. Paulson, former Chairman and Chief Executive Officer of Goldman Sachs was hired straight out of that position and became Secretary in July 2006.
Paulson's management of the present financial crisis or crises has received mixed reviews which are turning more and more negative since he reversed his plan this past week to purchase toxic assets from banks. He has been criticized for being slow to recognize the seriousness of the subprime situation and for favoring big banks rather than "Main Street" as well as not having a well thought out plan to resolve the crisis.
With Paulson still running the show, all eyes have now turned to the President-elect's selection and many are urging him to make his decision public sooner rather than later in the hopes it will settle jittery financial markets.
Rumors about who is favored for the position swirl and realign almost hour by hour and some players mentioned earlier are not such hot topics today. Still, the favorites seem to be Lawrence Summers who held the position once before in the Clinton Administration; Paul Volker who was Chairman of the Federal Reserve during the term of Ronald Reagan, Warren Hathaway, Chairman of Berkshire Hathaway; Federal Deposit Insurance Corporation Chairman Shiela Barr; New York Federal Reserve President Timothy Geithner; another former Treasury secretary (also under Clinton) Robert Rubin; Jamie Dimon, chairman of J. P. Morgan Chase; and the favorite as of today, former New Jersey senator and current governor Jon S. Corzine.
It is an interesting mix. It is heavily weighted toward current and former executives of major banks which may or may not be a good idea in the current economy and many contenders have previous Federal Reserve or Treasury experience. Lots of them have been through the swinging door between big banks and government at least once.
In no particular order we will take a look, over the next few days, at the leading candidates and give the odds on their actual selection as computed by U.S. News and World Report on November 6. As a measure of the flux surrounding this cabinet position, on that date Governor Corazine didn't even make the list.
Jon Stevens Corzine, as mentioned, has been Governor of New Jersey since January 2007 and has announced his attention to run for relection next year. The 62-year-old Governor served one term as a senator (2000 to 2006) where he served on Committees on Banking, Intelligence, the Budget, and Energy and Natural Resources. He co-authored the Sarbanes-Oxley Act, a piece of legislation designed to enforce corporate responsibility following the Enron, Tyco, and WorldCom scandals which generally drives corporate interests crazy. He voted against the Iraq War Resolution.
Corzine is a multi-millionaire and self-financed his two political campaigns which may have set records for the amounts spent. He is generally considered to be a political liberal.
He was born and raised in Illinois and was a Phi Beta Kappa graduate of the University of Illinois at Champaign-Urbana. He served as a reservist in the U.S. Marine Corps for six years while attending the University Of Chicago Graduate School Of Business where he earned a Master of Business Administration.
Prior to entering politics the Governor spent his career in banking and finance. He worked at Continental-Illinois National Bank and BancOhio National Bank before moving east and joining Goldman Sachs. He held a number of positions within the firm, finally becoming Chairman and co-CEO. He departed the firm in 1998 after his involvement in the rescue of Long Term Capital Management, a hedge fund which used highly leveraged money to invest in fixed income and statistical arbitrage and pairs trading. When the fund failed after losing $4.6 billion in the Russian financial crisis it was bailed out by a conglomerate of Wall Street firms including Goldman Sachs. As a senior partner at Goldman Sacs, Corzine was a key player in the bailout and when he made the decision to commit Goldman Sachs his co-chairman (ready for this) Henry Paulson seized control of the firm. There is no indication we could find that he failed to act responsibly or ethically in the Long-Term matter.
According to Corzine's gubernatorial website, during his tenure at Goldman he expanded the company's community outreach and philanthropic programs and the company was named by Fortune magazine as one of the 10 best companies to work for in the U.S.
Corzine's 33-year marriage ended in divorce in 2003. The only scandal that seems to have touched him regarded a romantic involvement with a union executive prior to his divorce.
A virtual unknown prior to the financial crisis, Sheila C. Bair has been Chairman of the FDIC since June, 2006. She is serving a five year term.
Ms. Bair was Dean's Professor of Financial Regulatory Policy at the Isenberg School of Management, University of Massachusetts-Amherst from 2002 until 2006 when she was sworn in for a five year term as the 19th Chairman of the FDIC.
Before her appointment to the FDIC, she also served as Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury; Senior Vice President for Government Relations of the New York Stock Exchange; Commissioner and Acting Chairman of the Commodity Futures Trading Commission; and Research Director, Deputy Counsel and Counsel to Senate Majority Leader Robert Dole. While at U Mass, Ms. Bair was a member of the FDIC's Advisory Committee on Banking Policy.
According to the FDIC website, Chairman Bair's prior work focused heavily on the banking sector. As the Assistant Treasury Secretary for Financial Institutions, she was charged with helping to develop the Administration's positions on banking policy issues. She worked closely with Treasury's own banking regulatory bureaus - the Office of the Comptroller of the Currency and the Office of Thrift Supervision - as well as the Federal Reserve Board and the FDIC.
Chairman Bair received a bachelor's degree from Kansas University and a J.D. from Kansas University School of Law. She is married to Scott P. Cooper and has two children.
Since early summer Chairman Bair has been a respectful critic of the administration's approach to the financial crisis. She encouraged an emphasis on working with delinquent homeowners from the failed IndyMac Bank to resolve their mortgage loans and keep them in their homes and quietly criticized the Treasury and Federal Reserve's emphasis on big banks rather than homeowners. She was successful in getting the administration to at least look at her approach and may have been instrumental in the recent announcement that FHA, Freddie Mac, and Fannie Mae were redirecting their efforts toward mitigating delinquent mortgage loans.
U.S. News rates Bair's chances for the Treasury position at 15 to 1, largely due to her lack of experience in Washington. On the other hand, her attention to homeowners has earned her substantial credibility and as a woman and a Republican she would be a two-fer for President-elect Obama's stated intention to have both a diverse and a bi-partisan administration.
We will see which of the other leading candidates for Treasury survive the weekend or who might be added to the list by Monday and will profile a few more of the contenders then.