Post-Election Update: Obama Faces Key Decisions that Will Impact Financial ServicesWith the historical presidential election behind the nation, newly-elected President Barack Obama has already established a transition team. The question of who will fill key cabinet positions such as Secretary of State and Secretary of Treasury also is at the top of many minds, especially in the financial services industry.
Obama is expected to name several nominees for Cabinet posts as early as this week. He has assembled a team of veteran financial professionals, including former Treasury Secretary Lawrence Summers and former Federal Reserve Chairman Paul Volcker, to assist with the transition in the economic hard times and meeting the expectations of voters who want action on campaign promises.
Economic recovery isn't around the corner, as Federal Reserve Chairman Ben Bernanke said last month that he expects the economy to be weak for several quarters.
Obama's choice of Treasury secretary has already been speculated on within the industry, candidates including Tim Geithner, the chairman of the New York Federal Reserve, and Larry Summers as well as Paul Volker. This appointment is seen as critical, even maybe more than whom Obama picks for Secretary of State. Volker was head of the Federal Reserve under Jimmy Carter and Ronald Reagan.
Geithner's strength was shown during the Wall Street meltdown. He helped oversee the JPMorgan acquisition of Bear Stearns and the Lehman Brothers and AIG bailouts. Geithner has been president of the NY Federal Reserve since 2003. Summers was treasury secretary under Bill Clinton and was chief economist of the World Bank from 1991 to 1993, and had taught economics at Harvard.
One thing that may delay Obama's announcement of Treasury Secretary -- the "Bretton Woods II" economic summit at the White House on November 15. He may delay naming his economic team to avoid interfering with the G-20 summit, although some economic analysts say he should be involved in the meeting. This involvement may be because he has much more to tackle to meet his agenda, which may end up being the broadest set of changes to the U.S. economy since the New Deal of the 1930s. Obama's call for a shift in taxes back to the wealthy, turning back the last 25 years of government deregulation, universal health care, and changes to free trade practices, may be tempered with the need to balance the federal budget and reign in deficit spending.
Financial services and institutions are already braced for the possibility of more regulatory scrutiny in the Obama administration. The call for more regulation and oversight on Wall Street comes after Treasury's report last March that laid out its blueprint for regulatory changes and an overhaul and possible elimination of some of the existing federal regulatory agencies.
On Wednesday Wall Street saw a drop in trading, as the Dow Jones Industrial Average dipped 170 points after a 300-point jump on election day trading. But analysts say that investors are refocused on the economy and expect the continuing slate of bad news, including the Labor Department's October employment report on Friday, to drive trading.