The choice of Timothy Geithner to be the next Treasury Secretary was greeted enthusiastically on Wall Street and sparked a huge rally in stocks.
An hour before the market closed, NBC News reported that President-elect Obama had picked Geithner, currently the president of the New York Federal Reserve Bank, for Treasury.
Obama, who will formally announce his economic team on Monday, also will tap New Mexico Gov. Bill Richardson as Secretary of Commerce, NBC News said.
The New York Times, meanwhile, said New York Sen. Hillary Clinton has agreed to become Obama's Secretary of State, although a spokesman for Clinton said she has not made a final decision.
Geithner, 47, is a career Treasury official who has worked at the department under five secretaries since 1988. He was undersecretary of international economics from 1998 to 2001 and served in several other Treasury posts. He become New York Fed president in 2003.
"A fantastic choice to help lead the financial markets out of the wilderness,'' said Chris Rupkey, senior economist at The Bank of Tokyo-Mitsubishi in New York. "A crisis manager par excellence who will hit the ground running as he has been on the case since the global funding crisis began way back in July 2007.''
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US stocks reversed earlier losses following the report of Geithner's nomination, with the Dow closing nearly 500 points higher.
Geithner's task will be enormous. The US is facing a worsening economy, prolonged credit and housing crises as well as rising unemployment. Geithner, however, has been closely involved in federal efforts to deal with the financial crisis, having worked with Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke
"Geithner is a solid choice. He has shown more independent thinking," said Former Sen. Don Riegle, who chaired the Senate Banking Committee during the savings and loan crisis. "He has also seen this financial system meltdown from the inside ... he can offer highly skilled and pragmatic advice to Obama."
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Some, however, think that Geithner might be too closely linked to the highly criticized management of the $700 Wall Street bailout fund, known as the Troubled Asset Relief Program, or TARP.
"There's a little bit of a question because he's associated with the bailout," said James Awad, managing director of Zephyr Capital. "And that's still a work in progress and not totally successful. There will be a few who'll be upset because he's associated with the TARP."
Still, "I would think the market is going to like it," Awad added. "People will view it as a safe choice, an experienced guy."
According to the New York Fed Web site, Geithner graduated from Dartmouth with a bachelor’s degree in government and Asian studies in 1983 and from the Johns Hopkins School of Advanced International Studies with a master’s in International Economics and East Asian Studies in 1985.
He joined the Treasury in 1988 and worked in three administrations, serving as Under Secretary of the Treasury for International Affairs from 1999 to 2001 under Rubin and Summers.
He become New York Fed president in 2003. In that capacity, he worked as the vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy.
Richardson, meanwhile, is a former United Nations ambassador and energy secretary during President Bill Clinton's administration, had been an early supporter of Obama after dropping his own presidential ambitions.
—Reuters contributed to this report.