Tim Geithner, president of the Federal Reserve Bank of New York, is expected to be named Barack Obama’s Treasury secretary, according to Democrats close to the decision.

US stocks rallied as news of the likely appointment leaked, ending weeks of uncertainty over who would succeed Hank Paulson at the forefront of efforts to tackle the financial crisis and revive the economy.

Mr Obama also appeared to be edging closer to naming Hillary Clinton, his former presidential rival, as secretary of state. A senior aide to the New York senator said talks over the job were “on track”. A formal announcement of Mr Geithner’s appointment could come on Monday while Mrs Clinton’s future is likely to be resolved after the Thanksgiving holiday next week, Democratic officials say.

Mr Obama’s transition team declined to comment.

The S&P 500 index closed up 6.3 per cent, ending a week of heavy losses, as investors reacted favourably to the prospect of Mr Geithner, 47, as Treasury secretary. He is a Treasury department veteran whose latest role as head of the New York Fed put him at the heart of the government response to the financial crisis and, particularly, its bail-out of AIG, the insurer.

The job of Treasury secretary has added significance since Mr Paulson was put in charge of the government’s $700bn bail-out of the financial sector.

Mr Obama had resisted calls to make an early appointment but Democrats said that this week’s market turmoil and worsening economic outlook highlighted the need for him to start putting in place his economic team.

Larry Summers, former Treasury secretary in the Clinton administration, had been mentioned as a possible Treasury secretary. Democrats familiar with the situation said he was likely to be offered a job as a White House economic adviser.

Bill Richardson, governor of New Mexico and former presidential candidate, emerged as the leading contender to become commerce secretary. Mr Obama is under pressure to find a role for Mr Richardson, a prominent Hispanic leader, after he broke with the Clintons to endorse Mr Obama in the primaries.

Mr Richardson, a former energy secretary and UN ambassador in the Clinton administration, had been considered a possibility for secretary of state.

Tim Geithner, president of the Federal Reserve Bank of New York, is expected to be nominated as Barack Obama’s Treasury secretary, according to Democrats close to the decision.

The Democrats said he was chosen ahead of Larry Summers, former treasury secretary in the Clinton administration.

News of the likely nomination came as a senior aide to Hillary Clinton said talks over her possible appointment as secretary of state were “on track” but said a final decision had not been made.

A formal announcement of Mr Geithner’s appointment could come on Monday while Mrs Clinton’s future is likely to be resolved after the Thanksgiving holiday next week, said Democratic officials. Mr Obama’s transition team declined to comment.

US stocks rallied as the news about Mr Geithner leaked out, ending speculation over who would succeed Hank Paulson. Mr Summers may be given a senior advisory role in the White House.

The job of treasury secretary, always among the most powerful roles in the cabinet, has taken on added significance since Mr Paulson was put in charge of the government’s $700bn bail-out of the financial sector.

Mr Geithner, 47, is a Treasury department veteran whose latest role as head of the New York Fed put him at the heart of the government response to the financial crisis and particularly its bail-out of AIG, the insurer.

The S&P index closed up 6.3 per cent, ending a week of heavy losses on a high, as investors reacted favourably to his likely appointment. Anthony Conroy, head of trading at BNYConvergEx said: “The market is taking the news as a big positive and people like clarity. He [Geithner] knows the game and is a smart guy.”

In another development, Bill Richardson, the governor of New Mexico and former presidential candidate, emerged as the leading contender to become commerce secretary. Mr Obama is under pressure to find a role for Mr Richardson, the most prominent Hispanic leader in the US, after he broke longstanding ties with the Clintons to endorse the president-elect in the primaries.

Mr Richardson, a former energy secretary and UN ambassador in the Clinton administration, had been considered a possible secretary of state until Mrs Clinton became favourite.

The Clinton camp said reports that she had made a decision to take the job were premature but signalled it was likely.

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