That is the perfect opening for Marion Maneker, who presents us with this guest essay. Marion is the Managing Partner at Colle, Hochberg and Grey, publishers of the Art Market Monitor. He is a former editor at New York Magazine and the Publisher at the HarperCollins business imprint. Marion has been observing the political and economic scene from a vantage point within the financial press for many years. His take is wry, sharp, and unique. I would not bet against his perspectives.
It isn’t easy being Secretary of Treasury these days. One minute you’re down on your knees begging the Congressional leadership not to blow up the world’s banking system; the next you’re fielding calls from the Chinese threatening god-knows-what if you don’t make them whole on the GSEs. Just look at the month Hank Paulson has had.
One of the effects of the market shock and bailout plan has been a renewed focus on the Secretary of the Treasury. Once a role for a worthy business figure whose job amounted to repeating the mantra “a strong dollar is in America’s interest”— usually as the dollar is sinking–the job has become something very different now and for the forseeable future. If Hank Paulson gets his way and Congress declares martial law over the financial community, the Treasury Secretary is going to be more Proconsul than cabinet functionary.
First, Paulson received nothing but praise for the way he handled the crisis; then he unveild his bailout plan. Suddenly it seemed like everyone turned against him — though Anatole Kaletsky had questioned his moves already. No matter what happens to the bailout, Paulson isn’t likely to be asked to stay on after the transition. So we have to start asking the question: who is going to be riding this tiger next?
This isn’t a question like, who would the new president appoint to the Supreme Court? Where the Treasury Secretary was once a high level consiglieri, the position is rapidly becoming a much more complex and intense job with no natural constituency . . . and little margin for error. Congress hates you; main street hates you; and pretty soon — with all that bickering as a distraction from its own misdeeds — Wall Street is going to start complaining again. As a cabinet position, it may soon overshadow the Secretary of State in political importance and be no more satisfying for the office holder than trying to make progress with the Israelis and Palestinians.
Having said that, the job is still a career capstone or a stepping stone to greatness. The speculation about the possible nominees under the next administration began a few weeks ago when the Wall Street Journal baldy asked if the Fed’s Timothy Geithner and FDIC’s Sheila Bair were leading candidates.
No disrespect to either Geithner nor Bair, both of whom look to have big careers ahead of them on either side of the public/private divide, but even a traditionalist’s view of the job would put it beyond their reach. The media focus requires some star-power, which Geithner still hasn’t got, and international experience. The GSE bailout revealed one half of the Treasury Secretary’s job: dealing with pressure from abroad. From news reports, we know that the holders of American debt–namely, government agencies for economic powerhouses like China who Daniel Gross points out currently hold mearly $1 trillion or 21.4% of the GSE debt–were on the phone with Paulson a few seeks ago demanding reassurances. Next thing we got was the Fannie/Freddie takeover.
Holding off our creditors abroad is going to take someone with real international stature and visibility. That’s why everyone is so relieved that Paulson is currently in the job. But being the former head of Goldman wasn’t always credential enough. Remember that Robert Rubin had to serve an apprenticeship in the White House while the grand old man of the Senate Finance committee, Lloyd Bentsen, kept the seat warm.
That’s one reason the Journal hedged their prediction with New
Jersey Governor John Corzine, a Rubin successor at Goldman (so why not
Treasury too?), and Jamie Dimon. Though one would be hard pressed to
understand why someone like Dimon, just entering the salad days of his
career, would want to deal with the US Treasury’s many headaches. Or to
put it another way, it’s a job with many of the same constituencies
Dimon has now but not the pay package.
Some enterprising reporter will have to ferret out the short-list as we move into the final phase of the campaign. The Times
didn’t get much this week. Out here in the cheap seats, we can still
follow the action because the jockeying and positioning for the job is
already going on in a very public way. Witness the recent op-eds in the FT and the NY Times by Evercore’s Roger Altman and opinion pieces from Steven Rattner in the Washington Post and the Wall Street Journal.
You might think of these as applications for the other half of the
Treasury job: banker-in-chief. That’s what Paulson has been doing,
playing banker to the biggest client of all. With the goverment’s clout
he can steer the financial world toward some safer combinations. Altman
and Rattner would be worthy successors in that respect.
Altman’s got unfinished business in Washington, having made a large fortune at Evercore and received a transplanted heart,
he must feel that now is the time to realize his life’s abiding
ambition, a big job in Washington. The disinterested tone of Altman’s
piece gives him the inside track on playing the self-less reformer
whose willingness to restructure power under the Fed for the good of
the economy and the nation just might allow him a victory lap in the
job he might have had instead of Rubin a decade and a half ago.
Backing the Clinton’s horse was Altman’s undoing, and it should
have put Steven Rattner out of the running as well. But Rattner’s skill with the media
goes beyond his celebrated friendship with Arthur Sulzberger. He’s been
blitzing CNBC and the dailies for two years now raising his profile
while his wife has done inside work as Democratic fundraiser. His GSE
op-ed showed the kind of war room Rattner must be operating with
speechwriters ready to pounce on any opportunity. A week later, Rattner
was on the opinion page at the Journal
giving his two cents on the failures of risk management that led to
Lehman’s fall and AIG’s rescue. That piece echoed the Washington Post
essay. Like the GSE op-ed, Rattner didn’t point a finger but focused on
future. The subtext of both efforts was the barely contained enthusiasm
of, " Give me the ball, coach!"
Unfortunately for Rattner’s ambition, he’s not really a banker in
Paulson’s mold. Rattner is more of an inside man, an advisor and
strategist. Cerebral, well-mannered and good with clients, his
personality doesn’t play so well on TV where the Chinese and Indian
billionaires are likely to need to see him much of the time.
That’s almost besides the point now. What we’re going to need is someone who can keep both Washington and Wall Street in line, someone with stature, political skills and the will to make a few omelettes. Lawrence Summers is the big dog of the Democratic camp is waiting in
the wings and he’s not been shy about positioning himself either (well,
not unless asked directly.) Using the Financial Times
as his platform to speak to the world’s economic community, Summers has kept himself current and increased his leverage. Here’s a
guy with record of building confidence — well, before he got to
Harvard — and the kind of international reputation that will keep our
creditors from picking up the phone at every tremor. After all, Summers
was on Time magazine’s “Committee to Save the World” cover with Rubin
and Greenspan. Even with the beating Alan’s reputation is taking,
that’s still good company to have been in.
He’s also adept at using his connections to build support among the elite. Here’s what he’s telling his fellow Harvard alums.
Nonetheless, this is still a political appointment. So just because
Summers is the most qualified for the job doesn’t mean he’s going to
There are plenty of wild cards waiting out there. Joseph Stiglitz has a Nobel prize that will turn heads but he’s an outlier. That hasn’t stopped him from sticking an oar in.
If things don’t go well for Morgan Stanley over the next few
months–and even if they do–John Mack might be looking for a
Paulson-like exit strategy. (Extra fun fact: the Secretary of the
Treasury gets to sell his holdings tax free when he takes the job.)
We’ve been looking at the Democrats, but we might have missed the
real contenders. If McCain wins he might want to keep Paulson on to
finish the job (what else is Paulson going to do with his career?) Then
there’s John Thain. He’s both redeemed himself with the sale of Merrill
and freed himself up for another position. Time
says he’s been close to McCain for a long time. They predict a future
for him in Washington if the Republican wins. Which would be great.
Thain could be CFO to the nation and figure out a way to spin off all
that unwanted to debt like he did at Merrill.
All of this talk of bankers and economists may be missing the real
point. If Treasury is going to guide the country through the next few
perilous years, we might prefer to have someone at the wheel who is
experienced in all aspects of the job. The perfect candidate would have
been a corporate leader and an elected official. He would have
experience with the markets–it wouldn’t hurt to have a name that’s
synonymous with financial sophistication–and a large enough fortune to
intimidate the Oligarchs and Emirs. It would help if he was a centrist
who could appeal to either political party.
Michael Bloomberg wanted to be president. But you can make the case
that being Secretary of Treasury could be the bigger job by 2009–and
he won’t have to spend his billions to get it.