John Fout
The House of Representatives on Friday faces another vote on the $700 billion financial-rescue bill, which the Senate approved overwhelmingly Wednesday night.
If the plan were to pass, it would authorize broader power to the Secretary of the Treasury, who will then be in charge of hundreds of billions of dollars to purchase toxic debt for the newly created Troubled Asset Relief Program (TARP). But 2008 is an election year, and the cast of players on Capitol Hill will soon change. The next president's administration will inherit the current financial crisis. As the economy continues to weaken, tight credit markets could further hamper business growth for months if not years to come. Thus, choosing the next Secretary of Treasury -- the president's top financial adviser, manager of public debt and formulator of fiscal policy -- will prove a critical decision for the president-elect on Nov. 5. What qualifications should the next Treasury Secretary have? Bill Gross, famed bond fund manager for Pimco, offered a profile of the ideal candidate in Financial Week:"The next Treasury secretary should be like a thoroughbred horse with the following lineage: one-fourth statesman to be able to navigate congressional rapids in ensuing years, as well as explain developments to the American people; one-fourth mathematician to be able to compute the cost of the rising federal deficit and its effect on the dollar and interest rates; one-fourth economist to be able to diagnose the state of the U.S. economy and the required level of stimulation to keep it above water and return it to positive real growth; and one-fourth horse trader to be able to understand the financial markets and their complexities and be able to recommend appropriate solutions."Someone who fits Gross' list of credentials would make Wall Street happy and instill confidence in the financial markets. However, Gross left out a key point that many on Main Street might want: a reformer. Nouriel Roubini discussed the growing complexities of the market in a recent op-ed piece for The Financial Times:
"Because of a greater regulation of banks, most financial intermediation in the past two decades has grown within this shadow system whose members are broker-dealers, hedge funds, private equity groups, structured investment vehicles and conduits, money market funds and non-bank mortgage lenders."All of these entities act like banks but skirt the regulations placed on banks. The current financial crisis and past ones -- such as Long Term Capital Management in 1998 -- demonstrate the necessity for regulating obscure financial derivatives such as credit default swaps.
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