Dodd wants new Treasury secretary after election

Senate Banking Committee Chairman Chris Dodd (D-Conn.) on Thursday said President Bush should consult his successor and immediately nominate the next Treasury secretary after the Nov. 4 election.

Dodd, speaking to reporters after a Banking panel hearing on the implementation of the $700 billion financial bailout, said the winner of the presidential contest between Sens. Barack Obama (D-Ill.) and John McCain (R-Ariz.) should press Bush to send the nomination in time to be confirmed during the Nov. 17 lame-duck congressional session.

{mosads}Regardless of which candidate wins, Dodd said such an act would provide a critical appearance of seamlessness as the country grapples with the current economic crisis. He compared the economic crisis facing the U.S. to a severe national security situation in which past presidents have often moved quickly to announce their national security teams — President George H.W. Bush announced James Baker as his secretary of State on election night in 1988, Dodd noted.

“The next president must appoint that economic team as quickly as you would suggest your national security team,” he said. “I’m not suggesting election night, but very quickly. I think it’s going to be important there be a seamless transition.”

Dodd said such an action would be unprecedented but said he would allow preparation before the next president is inaugurated.

“We’re not in the November-to-March period like we were in 1932, but Jan. 20 is a long time, and it wouldn’t be until early March until you get your people up and running,” Dodd said.

Dodd said he has raised the idea publicly and privately, including to officials in both campaigns. He said he has not suggested any names, and declined to offer those on Thursday.

Dodd’s comments came after an occasionally contentious hearing in which a series of Bush administration financial officials gave an optimistic progress report on the effectiveness of the two-week-old rescue plan.

Democrats at the hearing pressed officials and said the administration should be moving more quickly and with more scrutiny regarding how the money is spent.

Federal Deposit Insurance Corporation (FDIC) Chairwoman Sheila Bair and interim assistant Treasury Secretary Neel Kashkari said their agencies are scrambling to implement the massive plan and are so far seeing early success.

Bair said the FDIC has seen positive results from temporary increases in deposit insurance coverage and new debt guarantees to banks. She said the goal of both actions, to free up credit and restore liquidity to the market, so far seems to be working.

"While it is clearly too early to declare the end of the crisis in our financial markets … we are making steady progress in returning money and credit markets to a more normal state," Bair said.

Kashkari, the Treasury official in charge of oversight of the $700 billion plan, reported "numerous signs of improvement in our markets and in the confidence in our financial institutions" after the administration spent $250 billion to invest in nine of the largest U.S. banks.

However, Kashkari conceded that markets remain "fragile."

"We have accomplished a great deal in a short time, but our work is only beginning," he said.

The optimistic reports did not soothe committee members, who pressed the administration for more scrutiny, more regulation and more guarantees that the firms receiving taxpayer funds won’t misuse it.

Dodd said Kashkari, in his testimony Thursday, seemed to downplay the Treasury's intent to implement foreclosure assistance at a time when they're happening at a rate of tens of thousands per week.

Sen. Richard Shelby (R-Ala.), a staunch critic of the financial rescue plan and the committee’s ranking member, pressed the officials on the possibility that the government could only be prolonging the inevitable — that some banks will likely fail despite taxpayer intervention, and that it may be healthier to simply allow such failures to happen.

“How long can we continue to prop up some of these banks, and at what point does it become cost-effective to allow them to fail?” Shelby asked.