The Obama Economic Team

President-elect Obama announced his economic team last week. While it is too early to assess the strength of the team (like a football team, let’s see what they do on the field), we can make a few observations:

1) It is a mix of old and new faces:
A. Tim Geithner is a relatively new name on the national scene. He has been the head of the New York Federal Reserve and has been actively involved in the current financial crisis. That experience should be helpful as it provides some continuity. It also gives the Obama team a seat at the table prior to his taking officer on January 20th.
B. Larry Summers will head the National Economic Council. He was Treasury Secretary during the Clinton administration and he may well become Obama’s closest economic advisor. There was some belief that he would be given a second term at Treasury, but given his ill-conceived remarks made about woman while President of Harvard, a confirmation hearing in front of the senate may have been difficult.
C. Paul Volker will head the newly formed President’s Economic Recovery Advisory Board . I like this choice. Volker is experienced (having been the head of the Federal Reserve during the Carter and Reagan administrations) and seems willing to do the right thing, not always the politically expedient thing. His decision to raise interest rates in the late 70s and put the country through a tough recession was crucial in reducing inflation. At the press conference announcing the appointment, Obama said of Volker “He pulls no punches. He seems to be fairly opinionated.” I am confident that Volker will provide Obama with his uncensored opinion.
D. Christina Romer will head the Council of Economic Advisors. She is a well regarded economist, who has some supply side economic beliefs.

2) The new team does not appear to be full of ideologues and even Karl Rove generally liked the choices. It strikes me as a centrist group who will seek to combat the current financial crisis and deal with the recession. They will eventually deal with making broader changes to the tax code, but that is not the primary concern today.

3) While a tremendous amount has been spent and will be spent on “bailouts”, it does not appear that there will be a blank check. The Big 3 auto executives, which represent one of the most populist of groups to ask for money, were sent back to Detroit to craft a plan that will show how the companies can remain solvent if they receive government help. It was clear that Obama was disappointed with the auto executives.


One other thing that is important to note is that investors do not like uncertainty. Now that we know the group who will be overseeing economic policy (and it seems like a solid team), it is not a surprise that the markets have been stronger.