By Patricia Sellers
November 7, 2008

Barack Obama has been close to naming Larry Summers as the next Secretary of the Treasury, but the appointment is being held up by opposition to the brilliant but controversial economist. Fortune managing editor Andy Serwer said in his column Thursday that Summers, who headed Treasury under President Bill Clinton, is the lead candidate for the post in the new administration. Treasury officials have been led to believe that Summers will indeed get the post, according to sources, but Summers himself, as of last night, had not been told of any decision.

The discrepancy here suggests that behind the scenes, there is a powerful argument going on as to who is best for this job. Summers is brash and blunt, and he has quite a few detractors. His most public flap came in 2005, when he was president of Harvard University, post-Treasury, and he suggested at a conference on workforce diversity that women may be innately disadvantaged in science and engineering. Under a cloud, he resigned from the Harvard post in 2006.

Besides Summers, 53, other contenders for Treasury Secretary have included New York Fed boss Tim Geithner, former Goldman Sachs

co-CEO  Jon Corzine, and former Federal Reserve chairman Paul Volcker. A rapid-fire appointment makes sense not only because the economy is No. 1 on the minds of Americans. Even more important, on Nov. 15, the leaders of 20 nations will be gathering for the so-called G-20 economic summit. Obama isn’t planning to be at that meeting, but it will be critical for the next Treasury Secretary to be involved at least as an observer, if not to put forth recommendations.

Summers is already in Obama’s inner circle and a member of the president-elect’s Transition Economic Advisory Board. That 17-member board also includes Volcker, Warren Buffett, Google

CEO Eric Schmidt, Xerox

CEO Anne Mulcahy, Time Warner

chairman Dick Parsons, and Citigroup’s

Bob Rubin, who preceded Summers at Treasury and is one of his major backers. This morning, the group convened in Chicago with Obama and Vice President-elect Joe Biden. While Buffett didn’t travel to Chicago, he was planning to join by phone.

Meanwhile, Obama is likely to move quickly on other appointments as well. He could announce as early as next week that Robert Gates will stay on as Secretary of Defense. Another talked-about contender for that job: Republican Senator Chuck Hagel, whose appointment would signal strongly that Obama plans to surround himself with a Lincoln-esque team of rivals.

Meanwhile, Caroline Kennedy will likely play a key role in this new Administration. Rumor is that she will become ambassador to the United Nations — and that appears probable — but another conceivable post for her is Secretary of Education. This would make sense since she’s already worked hard and successfully to help reform New York City schools. A federal job would allow her to revamp Bush’s troubled No Child Left Behind program. (As for rumors that former Secretary of State Colin Powell—another Republican—could take the education post, one of his friends, former Reagan White House chief of staff Ken Duberstein, told the New York Times yesterday: “Fuhgeddaboutit.”)

As I mentioned on Postcards, I ran into Caroline Kennedy at JFK’s new JetBlue terminal at 6 a.m. last Wednesday, as she was boarding a plane for an Obama rally in Florida. No question, she’s willing to work hard for the president-elect.

P.S. One of Summers’ proteges during his first stint at Treasury is Sheryl Sandberg, who left D.C. in 2001, became the top woman at Google and is now COO of Facebook. Summers remains her big fan–“she a force of nature,” he told me in September–and Sandberg remains his. For her take on the controversy around him, read Larry Summers’ True Record on Women on the Huffington Post today.

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