Geithner Said to Plan Departure Before Debt Ceiling Reckoning

Thursday, 03 Jan 2013 02:19 PM

 

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Treasury Secretary Timothy Geithner plans to leave the administration at the end of January, even if President Barack Obama and congressional Republicans haven’t reached an agreement to raise the debt ceiling, according to two people familiar with the matter.

After giving in to Obama’s previous entreaties to stay as long as needed, Geithner has indicated to White House officials and Wall Street executives that he is unlikely to change his departure plans this time, increasing pressure on the president to name his successor at Treasury, said the people, who requested anonymity to discuss the private discussions.

Geithner, 51, is the only remaining member of Obama’s original economic team and was a key figure in the taxpayer- funded bailouts during the 2008 financial crisis. He’s also had a principal role in negotiations with Congress on the budget deal and in past deliberations over the debt ceiling.

White House Chief of Staff Jack Lew remains the leading contender for the Treasury job, the people said. Because Lew’s experience in financial markets is thin, Obama may seek to name a Wall Street executive as the deputy treasury secretary, they said.

While Lew, 57, worked as a managing director for Citigroup from July of 2006 until the end of 2008, he’s spent most of his career in government. He served as director of Office of Management and Budget for both Obama and President Bill Clinton and was an aide to the late Tip O’Neill, former speaker of the U.S. House.

Administration Approach

Administration officials had approached American Express Co. Chief Executive Officer Kenneth Chenault about joining Obama’s second-term cabinet, possibly as Treasury secretary. Chenault isn’t interested in leaving his private sector job, according to a spokesman.

“Ken has no plans to leave American Express,” said Michael O’Neill, a spokesman for the New York-based company, declining further comment.

A White House spokeswoman, Amy Brundage, declined to comment on personnel matters. Jenni LeCompte, a Treasury spokeswoman, also declined to comment.

After reaching an eleventh-hour budget deal that averted more than $600 billion in tax increases and spending cuts earlier this week, Republicans in Congress have said they will use the debate over raising the government’s $16.4 trillion debt ceiling next month to force concessions from Obama on spending and entitlements.

Pressure Point

“This is a pressure point, we should use it,” Republican Representative Scott Rigell said on Bloomberg Television. “I want Democrats to help us on this, we’re all in this together, we can’t continue to spend at this rate.”

Obama on Jan. 1 said he would not bargain over the debt ceiling and warned that the consequences of not raising the government’s borrowing authority “would be catastrophic.”

Geithner told Congress on Dec. 31 that the U.S. hit its statutory debt limit, necessitating emergency steps announced last week to keep funding government operations and avoid default. By relying on “extraordinary measures” Geithner has said treasury can create about $200 billion of “headroom” to avoid possible default.

The next treasury secretary will have a major role in negotiating the debt limit deal with Congress, said Ann Mathias, director of Washington research for Guggenheim Securities LLC.

Secretary’s Role

“Washington is turning from taxes to spending, which will dominate the view for the next quarter,” Mathias said in an e- mail. For the Treasury secretary, getting a deal done “will take an enormous amount of his, or her, time and involve the same back and forth between tables that we saw during the tax deal.”

Obama has said that he will not negotiate with Congress over raising the debt ceiling, though Republicans, as well as some of the president’s allies, say that he will have little choice.

February will bring negotiations over cutting spending and funding the government along with the debt ceiling issue, said Peter Orszag, Obama’s first Office of Management and Budget director.

“Whether the debt limit is technically included in the negotiations or not therefore doesn’t really matter,” he said in an e-mail. “A deal will have to be struck over other spending items anyway, and part of the ultimate deal will have to be an increase in the debt limit.”

Geithner’s Plans

Geithner told the president in June 2011 that he wanted leave the administration and return to New York. With the European debt crisis threatening global growth and a fight over the debt ceiling looming, the president persuaded him to stay through the end of his first term.

Since then, Geithner has made no secret of his desire to leave his post as soon as possible.

In a Nov. 16 interview for Bloomberg Television’s “Political Capital With Al Hunt,” Geithner said he will stay in his post until Obama’s inauguration, and he brushed aside suggestions that he might stay longer if a successor isn’t confirmed by then.

He said he’s “very confident that we’re going to get enough done in these next few weeks” and that Obama will “have a successor in place so I’ll be able to go off and do some other things.”

© Copyright 2014 Bloomberg News. All rights reserved.

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