Smooth transition good sign

As markets demonstrated last week, nothing is as upsetting during a time of turmoil as uncertainty. The treasury secretary's decision to change course and not use bailout cash to buy bad bank assets sent financial markets into a tizzy. Other investors now are on the sidelines, worried the rules could change again.

So it should be considered good news that President-elect Barack Obama introduced his financial team this week and that Timothy Geithner is his pick to be treasury secretary. That is less a judgment on Geithner's philosophy toward the job, which remains to be understood, as it is a judgment on how close he is to current treasury secretary Henry Paulson and how familiar he is with Wall Street and the current crisis.

As president of the New York Federal Reserve, Geithner played a big role in the decision to bail out insurer AIG. That alone will raise some probing questions during his confirmation hearing, we hope. The need for an AIG bailout remains as unclear as the reasons why AIG executives seem intent on continuing a lavish corporate lifestyle. Geithner also was a member of the Federal Reserve's Open Market Committee, which voted to keep interest rates artificially low for so long, triggering many of the real-estate problems that led to the current crash.

But these things may, in a strange way, argue in favor of his appointment. Geithner, we presume, is no fool. Having been a part of the process and having played a role in the response to the current crisis, he is a much better choice than would be someone completely new to the situation. He also has a reputation as a thoughtful person who listens carefully to what others say. The transition at Treasury in January ought to be smooth.

We're also encouraged by hints from the Obama team that it may be backing away from the campaign promise to immediately roll back the Bush tax cuts. Various officials said Sunday that the more likely scenario was to allow those cuts to sunset in three years. Obama himself was less certain when asked about this on Monday, but he left himself plenty of wiggle room, saying he would rely on his economic team for a recommendation.

As Obama is undoubtedly aware, any sort of tax hike, whether on the wealthy or the poor, would be disastrous for this teetering economy. It's good to know that campaign rhetoric is giving way to pragmatism and common sense.

President Bush's willingness to work closely with Obama during the transition also is a positive sign. When the administration decided to rescue Citigroup over the weekend, it was done after a phone call to Obama. We're not sure a Citigroup deal was necessary, but we are certain that cooperation and a smooth transfer of power are better for markets than the opposite.