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The next Treasury Secretary is...
Commentary: J.P. Morgan's Jamie Dimon is the leading candidate
By David Weidner, MarketWatch
Last Update: 12:01 AM ET Oct 14, 2008
NEW YORK (MarketWatch) -- Barring an October surprise, the fall election has all but been decided. The next question on Wall Street is whom President Obama will install as Henry Paulson's successor as head of the Treasury Department.
Though no decision has been made, the rumor is that the Obama camp has already reached out to its first choice. The eye-popper is that the potential pick -- Jamie Dimon -- has signaled an interest in the job.
A spokesman at Dimon's current employer, J.P. Morgan Chase & Co. JPM, declined to comment. So did the Obama campaign.
If it seems like Obama is noodling around with a job he hasn't even landed yet, consider that no job in Washington carries more influence in the midst of the credit crisis than Treasury secretary.
Newsweek dubbed Paulson "King Henry." Fortune called him the "steely-eyed Treasury chief" who's riding "to the rescue." Paulson has become the nation's financial czar, leaving President Bush as a secondary character in the battle against the biggest collapse in financial and credit markets since the Great Depression.
Paulson could stay on. Critics would have a hard time accusing him of partisan politics in the job. His former firm, Goldman Sachs GS, has produced a long line of prominent Democrats, including former Treasury Secretary Robert Rubin and New Jersey Gov. Jon Corzine.
And Obama reportedly thinks highly of Paulson. They were in contact daily during the height of the financial crisis.
But the chance of Paulson making history by staying on is small for a couple of reasons. For one, there isn't much precedent. Nicholas Brady was the last Treasury secretary to stay on after a sitting president left, but that was President Reagan who ceded the White House to his vice president, George H.W. Bush.
Obama has been keen to distance himself from the Bush administration. He will want to clean house and reward the party faithful with Cabinet posts.
Dimon and the Democrats
It wouldn't be a stretch to suggest Obama would simply be repaying a big campaign supporter. In the political world, Dimon hasn't been playing a neutral role. Over the past decade, he has contributed more than $500,000 to a variety of political causes, according to Federal Election Commission data culled by Opensecrets.org.
Dimon has leaned sharply toward the Democratic Party. He contributed $60,000 to the Democratic National Committee between 1996 and 2000. He's donated to New York politicians and Democrats seeking election outside the Empire State.
Dimon has also given to the senatorial campaigns of Harry Reid, Max Baucus, Harold Ford Jr. and congressional candidates such as Rahm Emanuel.
Republicans who have influence over financial regulation also received money from Dimon. He supported Rep. Michael Oxley, R-Ohio, who co-sponsored the corporate reform law passed in the wake of Enron Corp. and WorldCom. He gave money to Richard Shelby, R-Ala., who is the ranking member of the Senate banking committee.
OK, Dimon was a big booster for Sen. Hillary Clinton's presidential campaign. We're all getting along now, right?
Second choices
If Obama can land him, Dimon is clearly the best choice to fill the job. He boasts the Wall Street acumen that proved so essential during Paulson's two years at the helm. Dimon has a track record of success, having built J.P. Morgan, a commercial and investment bank, into the sole hybrid financial firm that has weathered the financial crisis largely unscathed. Considering its fire-sale acquisitions of Bear Stearns Cos. and Washington Mutual Inc., it may actually emerge from the wreckage a stronger firm.
Dimon also has clout. He was one of six bank chief executives called to participate in a meeting Monday afternoon in Washington with Paulson. On the table were new plans for market stabilization proposals.
But would he want it? The choice, for Dimon, would come down to his motivation. Some executives shy away from public service. Others embrace it. Dimon is a driven, ambitious executive who likes to take on challenges. He rescued Bank One Corp. and healed J.P. Morgan after its painful merger with Chase Manhattan.
Other than leading his firm completely out of the morass, there's not much left to prove.
None of the second choices reported to be on Obama's short list measure up. Laura Tyson, a former economist in the Clinton administration, served on the board of Morgan Stanley MS during its bungling of the Philip Purcell ouster. Robert Rubin came under fire for not taking a more active role in risk management at Citigroup Inc. C. Timothy Geithner, president of the New York Federal Reserve, won kudos for his handling of the Bear Stearns rescue, but hasn't led a company and wasn't well known before March.
Former Treasury Secretary Lawrence Summers is another Clinton retread. On the plus side, he's been advising Obama in a race where the candidate has an advantage in his economic plan. On the negative side, Obama has been slow to make proposals, and Summers was fired from his previous job at Harvard University.
Any of the second choices would be fine, but none as good as Dimon. So, even if the chatter is less than accurate, it's not off the mark. Obama should save his oratory to woo Dimon, one of Wall Street's brightest minds.
And for a guy who likes challenges, Dimon will never see a bigger one.
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