Geithner!

I'm pleased and surprised at the news that Tim Geithner will be the next Treasury secretary. Pleased because he's an insightful pragmatist who's more than qualified to do the job; surprised because I had thought that he might prefer to stay where he is, in what is essentially a tenured and extremely high-powered position at the New York Fed, rather than move to Washington for an uncertain period of time -- especially when his former boss, Larry Summers, is likely to have his own senior job at the White House, which will certainly include both some element of policymaking, and having Obama's ear. That said, Summers and Geithner work well together, so there aren't likely to be too many tensions between the two.

As for the big end-of-week stock-market rally, I think it's far too easy to ascribe it to the Geithner news. Stocks have moved around an enormous amount of late in the final hour of trading, especially on a Friday, and a small Geither uptick could easily snowball into a 500-point rally under those conditions. The chances that it will last, and that the bottom of the market will in retrospect be seen to be about 3pm this afternoon, seem slender indeed to me: I'd hazard that there are a few more major corporate failures coming down the pike, and that such events are just as capable of sending markets tumbling as Geithner's appointment is to send markets spiking.

Geithner has been worried about the international regulatory architecture for some time, and his September 2006 speech on the subject looks prescient, even if it concentrated a bit too much on hedge funds and not enough on leverage more generally. At ease in the international policy arena, he is America's greatest hope for putting together a coherent global financial system which encourages risk-taking without allowing it to get out of control. But before he can do that, he's going to have a lot of fires to put out, and a major stimulus bill to help draft. I hope he finds a replacement for his New York Fed job sharpish, because he's going to want a decent amount of time to prepare himself to hit the ground running on January 20.