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Obama seeks ‘jolt’ to economy

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Nicholas and McCormick are writers in our Washington bureau.

With the dramatic weekend rescue of Citigroup showing that the financial crisis remains an ongoing threat, President-elect Barack Obama introduced the central players of his new economic team Monday and charged them with developing a plan to stabilize the financial system and the job market.

Flanked in Chicago by officials who will shape his economic recovery plan, including his nominee for Treasury secretary and his chief economic advisor, Obama sought to drive home the message that he is already attacking the financial crisis two months before taking power.

In prior appearances, Obama has cautioned that the nation has only “one president at a time” and that he does not want to intrude on President Bush’s prerogatives. But with iconic financial institutions collapsing, he seemed intent on projecting an image of a sober leader determined to move fast.

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“It is my hope that the new Congress will begin work on an aggressive economic recovery plan when they convene in early January, so that our administration can hit the ground running,” Obama said at a news conference in his hometown, where he introduced Timothy F. Geithner as his nominee for Treasury secretary and Lawrence Summers as his chief economic advisor.

“If we do not act swiftly and boldly, most experts now believe that we could lose millions of jobs next year,” Obama warned.

The push to convey stability also came from Washington, where Bush, standing beside Treasury Secretary Henry M. Paulson on the steps of the Treasury Department, said his administration was working with Obama’s transition team. “There is close cooperation,” Bush assured.

Obama said his new team, as it writes its recovery plan, would consult with Congress and the Bush administration on its efforts, and that it would brief him daily.

“That work starts today, because the truth is we do not have a minute to waste,” he said.

Between Obama’s announcement and news of the Citigroup bailout, the stock market rallied for the second day in a row. The two-day surge of 891 points is the largest in percentage terms over two days since October 1987.

By making the nomination of a Treasury secretary his first formal Cabinet announcement, Obama also sent a message that stabilizing the faltering economy would be a central focus of his administration.

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Due to leaks last week, his choice of Geithner, 47, president of the Federal Reserve Bank of New York, came as little surprise. In his current role with the Fed, Geithner was involved over the weekend in the government’s efforts to shore up the faltering finances of Citigroup, the massive bank and financial services company.

Obama’s team includes other accomplished economists with deep experience in Washington. His choice to head the National Economic Council is Summers, a Treasury secretary in the Clinton administration. Widely considered one of the nation’s most brilliant economists, Summers became one of the youngest tenured professors at Harvard University when he was 28. He later served as the university’s president.

Christina D. Romer will lead the Council of Economic Advisors, which tracks economic data for the president and recommends policy. A professor at the UC Berkeley, Romer’s work has included studying causes of the Great Depression.

Melody Barnes will serve as director of the Domestic Policy Council. Barnes was an aide to Sen. Edward M. Kennedy (D-Mass.) and an executive at the Center for American Progress, a left-of-center think tank involved in planning Obama’s transition.

Geithner and Romer must be confirmed by the Senate.

Today, Obama is set to announce his new director of the Office of Management and Budget, which prepares the president’s version of the federal budget. A source familiar with events said the job would go to Peter R. Orszag, a specialist in healthcare policy and director of the Congressional Budget Office.

Geithner is expected to win easy confirmation by the Senate, but a key question is how intensely senators will grill him on his role -- which was substantial -- in developing the Bush administration’s financial rescue policies over the last few months.

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“Sure, people have raised the question: ‘Aren’t his fingerprints on some of the problems so far,’ ” said Jared Bernstein, an economist who has been an informal advisor to Obama. “But at the same time, Geithner knows these books very well and has a very good feel for the weaknesses in the banking system.”

A prominent Republican gave the nominations guarded support.

Sen. Charles E. Grassley of Iowa said: “During the campaign, the kind of change that the president-elect promised was so undefined it made me nervous. Now that he’s appointing familiar faces from the Clinton administration to very high-level positions, I’m less concerned.”

Obama portrayed his team as immensely talented.

Fixing the economy “won’t be easy,” Obama said, “and it won’t happen overnight. We’ll need to bring together the best minds in America to guide us. And that is what I’ve sought to do in assembling my economic team.”

Obama unveiled his choices in a period of widespread anxiety. Jobless claims are at the highest level in 16 years. The Big Three domestic automakers say they need a taxpayer bailout to remain viable. On Sunday, Bush approved the multibillion-dollar rescue of Citigroup.

With the Bush administration set to relinquish power in less than two months, the economic meltdown is unfolding amid what some analysts call a leadership vacuum. Obama seemed eager to demonstrate that he was filling the void.

He named his Treasury secretary nominee only 20 days into his transition. By contrast, Bill Clinton made his Treasury selection 37 days into his transition. (George W. Bush’s transition was foreshortened because of the prolonged Florida vote recount.)

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Experts on the presidency said Obama could not afford to look detached.

“There’s this confidence gap in the market, and I think people are looking to him right now to provide a measure of certainty during a period of great anxiety,” said Paul Light, a professor at New York University’s Robert F. Wagner Graduate School of Public Service. “And George Bush no longer has credibility. So my view is if Obama doesn’t use that power, he is going to inherit this crisis by himself.”

As Obama unveiled his new Treasury secretary, Bush met with the current one -- and spoke of the importance of a smooth transition from one administration to the next.

He also said that more bailouts could be on the horizon.

“We have made these kinds of decisions in the past, made one last night, and if need be we’re going to make these kinds of decisions to safeguard our financial system in the future,” Bush said.

Bush spokesman Tony Fratto declined to give details of the conversation between Bush and Obama, except to say that Bush, the 43rd president, wanted to make sure the 44th president “knew everything we were doing.”

“It’s very important that we’re on the same page on all of this,” he said.

At the Chicago news conference, Obama’s staff divided the hotel ballroom into two halves named for Chicago’s baseball teams: the Cubs and the White Sox. Obama is an avid Sox fan, but did not ignore the Cubs side of the room.

The president-elect urged quick passage of a stimulus package that is capable of giving the economy a “jolt.” Pressed about the size of the package, he would not commit to a dollar amount.

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“I want to see it enacted right away,” he said. “It is going to be of a size and scope that is necessary to get this economy back on track.”

He added that any stimulus package should focus on the 2.5 million jobs that he intends to create during the first part of his administration. “We have to put people back to work,” he said.

Democrats in Congress, who have been consulting with Obama’s transition team and campaign staff on economic policy, welcomed the promise of quick action on a stimulus bill. Indeed, some leaders want to see a stimulus bill passed in January, even before Obama is sworn in, giving him a bill to sign on his first day in office.

“Obama realizes we’re in an economic crisis and we cannot afford any on-the-job training,” said Thomas Kahn, staff director of the House Budget Committee.

Obama appeared largely in step with congressional Democratic leaders. Asked about the auto industry executives who testified before Congress last week, Obama endorsed Congress’ demand that they submit a detailed plan for the money as a condition of any bailout.

“I was surprised that they did not have a better-thought-out proposal when they arrived in Congress,” Obama said of the auto executives. “I think Congress did the right thing, which is to say, ‘You guys need to come up with a plan and come back before you’re getting any taxpayer money.’ ”

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peter.nicholas@latimes.com

mccormickj@tribune.com

Washington bureau writers Christi Parsons and Janet Hook contributed to this report.

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Peter Nicholas reporting from Washington

John McCormick reporting from Chicago

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(BEGIN TEXT OF INFOBOX)

Timothy F. Geithner

TREASURY SECRETARY

* President and chief executive of the Federal Reserve Bank of New York.

* Has played a key role in fighting the current financial crisis.

* Served in the Department of Treasury under three presidents since 1988.

* Onetime undersecretary of the Treasury for international affairs.

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Christina D. Romer

CHAIRWOMAN, COUNCIL OF ECONOMIC ADVISORS

* UC Berkeley economist.

* Co-director of the monetary economics program at the National Bureau of Economic Research.

* Expert on U.S. recovery from the Great Depression.

* Has researched subjects including tax policy and the nature of recessions.

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Lawrence Summers

DIRECTOR, NATIONAL ECONOMIC COUNCIL

* Secretary of the Treasury under President Clinton.

* Obama has called him the “central architect” of policies that led to the longest economic expansion in U.S. history.

* Served a controversial tenure as Harvard president from 2001 to 2006.

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Melody Barnes

DIRECTOR, DOMESTIC POLICY COUNCIL

* Served as executive vice president for policy at the Center for American Progress, a Democratic think tank.

* Served eight years as chief counsel to Sen. Edward M. Kennedy (D-Mass.) on the Senate Judiciary Committee.

* Has expertise on immigration, crime and civil rights.

Reporting by Christi Parsons and Jill Zuckman / Washington bureau

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