A crisis manager for the New York Fed

Does the New York Fed need a crisis manager?

Pete Peterson seems to think so. As chairman of the bank’s board, the investment banker and former Commerce secretary sought to replace Bill McDonough as New York Fed president with someone who could cope with what Peterson sees as twin dangers threatening the markets: the U.S.'s current-account and fiscal deficits.

That eventually led him to a not-so-obvious choice: Tim Geithner, the soft-spoken, 42-year-old former U.S. Treasury undersecretary, who was most recently director of the IMF’s policy development and review department. At Treasury, Geithner “had gone through the Asian crisis, the Russian crisis and on and on, and I thought that was a relevant background according to my weighting of priorities,” says Peterson, who runs Blackstone Group. The New York Fed functions as the Fed’s go-between with global capital markets.

It certainly didn’t hurt Geithner’s chances that he received glowing recommendations from two former Treasury secretaries: Robert Rubin, now chairman of Citigroup’s executive committee, and Harvard president Lawrence Summers. “I had long talks with Bob Rubin and Larry Summers, and both felt Geithner was an outstanding person,” says Peterson.

In 1998 Rubin promoted Geithner, who holds a master’s in international economics and East Asian studies from Johns Hopkins, to Treasury undersecretary for international affairs, making him the department’s first-ever career staffer to reach the rank of undersecretary.

Geithner “is someone you want by your side in an emergency,” says Gary Gensler, a former Treasury undersecretary for domestic finance who worked alongside him.

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