Wall Street is reacting positively to the government's latest bailout of Citigroup and President-Elect Barack Obama's pick of New York Fed Chief Timothy Geithner as his Treasury Secretary.The U.S. Treasury's rescue package to bailout Citigroup with a $20 billion capital infusion and guarantees on $306 billion in losses from toxic assets, boosted confidence in the stock market and the regulators' plan to stabilize the banking giant. The Dow soared 389 points today and Citigroup shares rose 58 percent to $5.95 recovering from its low of $3.20 last Friday.
President Elect Barack Obama announced his economic team to the world at noon (ET) today, confirming that Geithner, 47, would be his Treasury Secretary. News of Geithner's selection was met with euphoria on Friday as the market rose nearly 500 points in search of good news after a brutal week.
According to a report in today's New York Times, Geithner played a crucial role in the weekend round-the-clock negotiations to rescue ailing Citigroup, which was deemed too big to fail. Last week Citigroup's stock lost more than 60 percent of its value in three days of trading closing at $3.77 last Friday.
As many have reported, Geithner is highly respected among Wall Street CEOs where he has been a key decision maker in the credit crisis, specifically in the sale of Bear Stearns and he was among the first regulators to raise concerns about credit default swaps. In addition to stabilizing financial institutions like Citigroup that are holding problematic U.S. home loans, commercial mortgages and subprime debt, Geithner will have a lot on his agenda, including the restructuring the U.S. regulatory system.
On the Sunday morning talk show circuit, Obama's incoming senior adviser David Axelrod, said Geithner "is uniquely qualified," and noted that he is steeped in economic knowledge and crisis manager. But interviewer George Stefanopolis pointed out that Geithner was in the middle of the decision to let Lehman Brothers fail, which critics say has led to financial market instability. Geithner was also involved in hammering out the $700 billion bailout package with the Trouble Assets Relief Program or TARP, whose success is debatable.
In his defense, Axelrod said: "Tim Geithner was an early warning system in terms of needs for greater regulation and has been ahead of the curve on a lot of the issues. He is the person you'd want when we are facing economic pressures like today," said Geithner on the ABC News Program. Yesterday, in the same broadcast, Sen. Charles Schumer of New York threw his support behind the bailout of Citibank, saying a failure would cause millions of innocent people to suffer. He also said that other parts of the company were functioning well such as the consumer bank.
Meanwhile, Sen. Richard Shelby (Rep,) of Alabama threw his support behind Geithner as well. "He's young. He's innovative. He knows a lot about the economy and he was involved with the bailout - though it hasn't worked perfectly," said Shelby. Still is a breath of fresh air so to speak. I think he will do well," said the senator.
Here's the video, "Axelrod on Obama's Treasury Pick."As many have reported, Geithner is highly respected among Wall Street CEOs where he has been a key decision maker in the credit crisis, specifically in the sale of Bear Stearns. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio