By Glenn Somerville and Rachelle Younglai
WASHINGTON (Reuters) - Timothy Geithner may be musing about stepping down as Treasury secretary but President Barack Obama has ample reason to try to talk him out of it, not least that doing so would avoid a bruising succession battle.
Given the poisonous political atmosphere on Capitol Hill, getting a new Treasury chief through Senate nomination hearings and a vote in which some Republican support would almost certainly be needed would be a struggle in itself.
Beyond that, the process of choosing a successor would create a stage for the administration's Republican opponents to highlight the economy's continuing woes just as Obama prepares for a tough 2012 reelection bid.
Simply finding a candidate to bridge some of the divide between the White House and Republican lawmakers and to deal with a business community coming under tougher regulatory scrutiny would be a challenge.
"The person can't have a blackened soul from Wall Street's sins, but also can't be a Democratic hack," said Larry Sabato, director of the University of Virginia's Center for Politics.
Obama thinks Geithner has done an excellent job and wants him to stay, and analysts say the president has plenty of reasons to try to persuade him to do so.
William Cline, a senior fellow at the Peterson Institute, says he thinks it is premature to talk about Geithner leaving.
"I think we're not fully out of the financial crisis yet, and so for that reason you want someone at Treasury who is fully conversant with all the crisis issues," he said.
OBAMA'S POLICIES ON TRIAL
Geithner is the last of Obama's original economic team, a trusted adviser who came in during early 2009 to help steer the economy out of the worst of the 2007-2009 financial crisis and into what is still a fragile recovery.
He is considering stepping down when an agreement to hike the nation's $14.3 trillion debt limit is finally reached, according to sources familiar with his thinking. The sources said he has not made a final decision.
Geithner has warned that the debt limit needs to be raised by August 2 to avoid a U.S. default, though talks over a package of budget cuts that would give lawmakers political cover to raise the limit have broken down in acrimony.
The Treasury chief, who was the head of the New York Federal Reserve Bank when the financial crisis broke, hedged when asked about his plans, but with his family moving to New York in a few months and after several grueling years, he has reason to want to leave.
One of Obama's problems is that his reelection bid will be fought in a climate tinged by a weak economy, persistent high unemployment and huge budget deficits -- all issues that a Treasury chief is expected to cope with.
Any nominee would have to weather hearings that could play into the hands of Obama's opponents, who would use them as a forum to put the administration's policies on trial.
"It gives the Republicans opportunity to lambaste the record of the Obama administration and have a national stage for a debate on jobs and the economy," said Ethan Siegal, an analyst with The Washington Exchange.
If Geithner does part ways with the administration, Obama may seek a candidate who could calm the waters by bridging some of the stark ideological divide between Capitol Hill Republicans and Democrats over issues like taxes.
"He may want to pick a Republican, a Bob Gates sort of person," said the University of Virginia's Sabato, referring to the former defense secretary who served both Obama and George W. Bush.
Some analysts have speculated Obama might want to press New York Mayor Michael Bloomberg, a one-time Republican, into service, or perhaps turn to JPMorgan Chase's chief executive, Jamie Dimon, although he is said not to be interested.
A Republican congressional aide said an Obama nominee would likely be confirmed if the person is credible and not a "wild-eyed advocate" for the left's agenda.
"If they pick a normal candidate, I think it would set them up for some lengthy debate on the economy," the aide said. "If they pick a wild-eyed advocate who wants to support their higher level of spending and thinks higher taxes will be a good thing ... they would have a hard time getting that one confirmed."
Democrats would need a handful of Republican votes to garner the 60-vote margin that would be needed to overcome any procedural hurdles in the 100-seat Senate.
The Peterson Institute's Cline said the political calculus argues for someone with Republican credentials, but noted that it might be a tall order to fill amid a raging debate about whether some tax increases are needed to close the U.S. budget gap.
"I'm not sure how many Republican candidates for Treasury secretary you're going to find who'd be willing to make the case that some tax increases are necessary," Cline said.
(Additional reporting by David Lawder, Steve Holland and Jeff Mason; editing by Leslie Adler)