Jack Lew joins a team of unrivals

In nominating Jack Lew to replace Tim Geithner as Treasury secretary, Barack Obama has stuck to his inner circle. Presidents like to fill big jobs with those they trust. Mr Lew, who for the past year was White House chief of staff and before that head of its budget office, certainly fits that bill. He brings an insider’s knowledge, having served in the Clinton White House and as a Capitol Hill staffer. There can be little doubt he possesses an excellent grasp of the technicalities and will speak with the president’s confidence.

Yet Mr Lew’s selection also hints discomfitingly at the status quo. He will inherit a confluence of formidable challenges. In addition to the next fiscal cliff and the related threats on the debt ceiling and a possible government shutdown, the eurozone’s problems pose a continuing danger to US financial stability. There is also the matter of overseeing Wall Street re-regulation and steering the US economy on a path to sustained recovery. Coping with these challenges will require heft and broad expertise. Mr Lew knows the US budget inside out. That is a necessary but not sufficient criterion for success.

From Alexander Hamilton to Robert Rubin, America’s most effective Treasury secretaries have possessed a vision that put their stamp on the economy. As a high-level functionary and longtime Democratic party loyalist, Mr Lew’s chief qualifications are technocratic. He will need to get rapidly up to speed on three issues.

First, implementation of Dodd-Frank must be accelerated. The Volcker rule that separates proprietary trading from insured banks has yet to be put into practice. There is continuing uncertainty on derivatives regulation. It is up to the Treasury secretary to drive these forward. As a former senior Citibank executive, Mr Lew needs to dispel doubts over his willingness to face down special interests.

Second, he must ensure that whatever deal emerges from the March 1 fiscal cliff preserves the recovery while setting the US on a fiscally responsible course. This will require conviction as well as nous. Now is not the time to emulate sharp EU austerity.

Finally, Mr Lew lacks anything like his predecessor’s international experience. Whether through the G8 or at the Bretton Woods Institutions, the US Treasury secretary is the country’s chief international economic actor. Mr Lew will be a newcomer on the world stage at a moment that demands a sure touch. There will be no honeymoon in this job. Mr Lew will need a strong team around him.