FORTUNE — On the day reports surfaced that Tim Geithner would be nominated for Treasury Secretary back in November 2008, the Dow Jones industrial average surged 494 points. On Wednesday, Obama indicated that he would nominate Jack Lew to replace Geithner. The market shrugged, with most of its modest gains coming before word spread of the Lew nomination.
But at least stocks didn’t tank. A number of Wall Streeters have been saying for awhile that Lew, who had been widely rumored to be Obama’s top pick for the job, was a bad choice. Lew has very little experience on Wall Street, and none as a regulator. Some said appointing a person unknown to Wall Street would rattle markets.
That didn’t happen, but that hasn’t stopped the parade of misgivings of Wall Streeters about Lew.
Earlier: Wall Street isn’t backing Jack Lew for Treasury
“He’s an empty suit,” says market strategist James Bianco, who heads up his own Chicago-based research firm. “In Wall Street’s mind, Lew is the fifth best choice.”
Initially, it seemed that Obama would go out of his way to reconcile with Wall Street bankers, who overwhelmingly supported Mitt Romney, after the election. And Obama has held meetings with top executives and bank CEOs. Lew has even met with JPMorgan Chase (JPM) CEO Jamie Dimon.
But by picking Lew, Obama is signaling he won’t be bending over backwards to win back Wall Street’s support. And depending on where you sit, or more accurately work, you may not view that as a good thing. Wall Street veteran Wilbur Ross, who heads private equity firm WL Ross and was a vocal supporter of Mitt Romney during the election, was quick to note how Lew’s lack of Wall Street chops when compared to Geithner.
“While he doesn’t have the technical skill of his predecessor, he does know his way around the Hill and Washington,” said Ross. “I hope he will prove to be a conciliatory figure.”
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Nonetheless, there is some encouraging news for Wall Street. Lew has spent most of his career dealing with Washington’s fiscal issues. He’s been involved somehow in nearly all of the big budget deals of the past three decades. Strategists and investment bankers say uncertainty around the government’s fiscal issues is the main thing holding back stocks and deal making. If Lew can help strike a deal with Republicans before the early March debt ceiling deadline that could be a huge boost to the market.
The question is what happens after that. Lew will have to deal with market regulation eventually. Some compared the Lew pick to former Reagan-era Treasury Secretary James Baker, who like Lew had little market experience but was widely viewed as a success. But the comparison to Baker is imperfect at best.
Thanks to the Dodd-Frank financial reform rules, the Treasury Secretary got a much bigger regulatory role. What’s more, the economy is more market driven than it was just three decades ago. In addition, the government has done almost nothing to reform the mortgage market since the financial crisis. Dealing with the government-controlled mortgage giants Fannie Mae and Freddie Mac could be key to fixing the housing market.
So while you can dismiss some of Wall Street’s complaints as the 1% griping about not getting their way (and indeed that is some of it), that’s not all it is. Lew will have to find a way to earn the trust of bankers and high-profile investors. He hasn’t done so just yet.
“To be an effective Treasury Secretary you need the confidence of Wall Street and the confidence of the president,” says Randal Quarles, a managing director at the Carlyle Group who oversaw market regulation at the Treasury Department during George W. Bush’s presidency. “Lew obviously has the second of those. So I think it’s a positive choice with a little bit of wait and see.”
