1 of 2. U.S. President Barack Obama announces his nomination of White House chief of staff and budget expert Jack Lew (R) as his next treasury secretary, in the East Room of the White House in Washington, January 10, 2013.

WASHINGTON | Thu Jan 10, 2013 7:06pm EST

WASHINGTON (Reuters) - President Barack Obama on Thursday nominated his chief of staff, Jack Lew, as the next Treasury secretary, praising him as a expert on the pressing national issues of U.S. government spending cuts and deficit reduction.

If confirmed by the Senate as expected, Lew would succeed Timothy Geithner and take the lead on difficult negotiations with Congress on how to cut the nation's massive debt and rein in spending - a central challenge for Obama's second term.

Lew, a 57-year-old New Yorker who has previously served as White House budget chief, is likely to face tough questions from Republicans in his Senate Finance Committee confirmation hearing after the bruising year-end battle over tax increases on the wealthy.

Obama described Lew as "a low-key guy who prefers to surround himself with policy experts rather than television cameras," and said the son of a Polish immigrant had a deep belief in public service.

"Over the years, he's built a reputation as a master of policy who can work with members of both parties and forge principled compromises," Obama said.

Since the Treasury secretary signs U.S. currency, Obama teased Lew for his unusually loopy signature and joked that the nominee had promised "to make at least one letter legible in order not to debase our currency."

Denis McDonough, Obama's deputy national security adviser, is considered the leading candidate to replace Lew as White House chief of staff.

Lew has experience in tough financial negotiations, having led talks with Congress in 2011 that brought a deal to avert a U.S. debt default. A similar battle looms now.

As budget director for former President Bill Clinton, he presided over a string of budget surpluses between 1998 and 2000. "For all the talk out there about deficit reduction, making sure our books are balanced, this is the guy who did it, three times," Obama said.

NEXT STEP: THE SENATE

Lew's nomination now will be vetted by the Senate, where Senate Finance Chairman Max Baucus, a Democrat, promised a "speedy but thorough" hearing. No date has yet been set.

Senator Orrin Hatch, the top Republican on the panel, said he plans to ask Lew about the administration's strategy for spending cuts, something Republicans have insisted needs to be made clear before they will agree to raise the debt ceiling.

Obama has vowed not to negotiate over the debt ceiling, which could be reached as early as mid-February.

"It's imperative that Mr. Lew outline the administration's plans on tackling our unsustainable debt, what areas of federal spending should be cut, and what kind of reforms - from our tax code to our entitlement programs - are needed to get our fiscal house in order," Hatch said in a statement.

Senator Bernie Sanders of Vermont, an independent who caucuses with Democrats, said he would not vote for Lew because he did not think he would "stand up" to Wall Street and lobbyists. Sanders said Lew likely would win enough votes for confirmation.

Republican Senator Jeff Sessions of Alabama said he thinks Lew "needs to be held accountable" for Obama's economic policies.

"We need somebody with international credibility, a heavyweight financial person to help get this country's growth path moving," Sessions told Reuters.

LEW A 'TOUGH DUDE'

At the White House announcement, Geithner earned sustained applause for his work helping the administration navigate the financial crisis that put banks at risk and cratered the housing market early in Obama's first term.

At least two former White House budget directors were in the audience for the Lew announcement, including Alice Rivlin, who headed the budget office in the early 1990s, later became a vice chair of the Federal Reserve, and who remains a fixture in fiscal policy debate.

Also attending was Franklin Raines, who led the budget office from 1996 to 1998. He was ousted as chief executive of mortgage finance giant Fannie Mae after an accounting scandal.

Some analysts have questioned whether Lew has enough experience working on international financial issues and on banking regulations.

But the White House has highlighted international experience Lew gained during a stint at the State Department, and his "strong relationships in the business community," having worked as a managing director at Citigroup.

Thomas Donohue, president of the U.S. Chamber of Commerce, said that all Treasury secretaries have to "compensate for the areas where they don't have experience" with strong deputies.

Donohue, whose business lobby has often butted heads with the Obama administration, told reporters he thought Lew was a "skilled operative" and a "tough dude."

"I think Jack Lew will do fine," Donohue said.

(Additional reporting by David Lawder, Mark Felsenthal, Steve Holland, Jeff Mason, Richard Cowan, Rachelle Younglai and Roberta Rampton; Editing by Will Dunham)

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1 of 9. U.S. President Barack Obama (L) announces the nomination of Senator John Kerry (D-MA) as Secretary of State to succeed Hillary Clinton, at the White House in Washington December 21, 2012.

WASHINGTON | Fri Dec 21, 2012 9:25pm EST

WASHINGTON (Reuters) - President Barack Obama on Friday nominated John Kerry to replace Hillary Clinton as secretary of state, calling the veteran U.S. senator the "perfect choice" for America's top diplomat as he began reshaping his national security team for a second term.

Obama settled on Kerry, chairman of the Senate Foreign Relations Committee and the 2004 Democratic presidential candidate, after the front-runner, U.N. Ambassador Susan Rice, withdrew from consideration last week.

Even as Obama put one important piece of his revamped Cabinet in place, he held off on naming a new defense secretary. The delay came in the face of a growing backlash from critics of former Republican Senator Chuck Hagel, who is considered a leading candidate to replace Leon Panetta at the Pentagon.

With Kerry standing at his side, Obama expressed confidence that the senator - a stalwart supporter who has long coveted the State Department job - would win swift confirmation from his Senate colleagues.

"As we turn the page on a decade of war, he understands that we've got to harness all elements of American power and ensure that they're working together," Obama said. "John's earned the respect and confidence of leaders around the world. He is not going to need a lot of on-the-job training."

The announcement fell short of the White House's earlier hopes of rolling out national security appointments, including a new CIA director, all at once before Christmas. That ambition was thwarted not only by the Hagel controversy but other matters that have occupied Obama's attention - the standoff over the "fiscal cliff" and last week's Newtown gun massacre.

Kerry, 69, will take over from Clinton, who has been consistently rated as the most popular member of the president's Cabinet.

But he will also have to pick up the pieces after a scathing official inquiry found serious security lapses by the State Department in the deadly September 11 attack on the U.S. diplomatic mission in Benghazi, Libya - a report that has tarnished the final days of Clinton's tenure.

Kerry's nomination follows a political firestorm that engulfed Rice, seen as the early favorite for the State job, spearheaded by Republicans fiercely critical of her role in the administration's early explanations for the Benghazi assault.

Rice was defended by Obama, but she said on December 13 she was pulling her name from consideration to avoid a potentially lengthy and disruptive confirmation process.

Kerry, known for his role as a Democratic power broker in the Senate, offers no such challenges.

His selection sets a pragmatic tone as Obama begins overhauling his national security team.

Kerry will be the leading Cabinet member charged with tackling pressing global challenges, ranging from upheaval in the Middle East to Iran's nuclear standoff with the West and winding down the war in Afghanistan - all at a time of fiscal austerity at home.

SUBDUED NOMINATION ANNOUNCEMENT

Obama appeared subdued as he announced the nomination. He and Kerry had just returned from a funeral service for Hawaii Senator Daniel Inouye at the National Cathedral.

Kerry looked on intently as Obama spoke, nodding occasionally. But the lawmaker known for sometimes long-winded speeches was not given a chance to address reporters at the White House. Clinton was absent due to illness but issued a statement saying Kerry would offer the "highest caliber leadership" at the State Department.

Kerry, a decorated Vietnam War veteran, has forged a close working relationship with Obama and gave him the keynote speech assignment at the 2004 Democratic convention that boosted a then little-known Illinois state legislator onto the national stage, opening the way for his meteoric rise.

After losing narrowly to Republican George W. Bush in the 2004 presidential election, Kerry forged a new identity as a congressional leader on foreign policy. He often served as a low-profile emissary and diplomatic troubleshooter for the Obama White House in places like Afghanistan, Pakistan and Syria.

Kerry played the role of Mitt Romney in Obama's debate practice during the 2012 campaign, and afterwards Kerry joked that he would need an "exorcism" to get the Republican out of his system. "Nothing brings two people closer together than weeks of debate prep," Obama quipped to reporters on Friday.

White House aides acknowledge, however, that Kerry does not have as close of a personal bond with Obama as Rice has. She said, in a message on Twitter, that she looked forward to "working with him on the president's national security team."

Kerry's departure from the Senate forces Democrats to defend his seat, where the party has only a slim majority. Just-defeated Massachusetts Republican Senator Scott Brown, who took office in early 2010 after winning the last special election for a Massachusetts seat, is widely expected to run.

The drumbeat of criticism against Hagel, a moderate Republican who has often broken with his party's views, could prompt Obama to reconsider whether it would be worth the likely confirmation fight if he were to chose him for the defense post.

The administration has given no sign of dropping Hagel from the short list. On Thursday it joined allies rallying to support him against an onslaught over his record on Israel and Iran led by some pro-Israel groups and neo-conservatives, but the attacks have also come from some former colleagues on Capitol Hill.

He has also come under fire from gay rights groups for remarks questioning whether an "openly aggressively gay" nominee could be an effective U.S. ambassador. Hagel issued an apology on Friday for the 1998 comment, saying it was "insensitive."

It is the second time since Obama's re-election that the White House has had to defend a Cabinet candidate who has yet to be nominated, a source of frustration for his advisers.

Also in the mix for the Pentagon job are Michele Flournoy, a former undersecretary of defense for policy, and Ashton Carter, the current deputy defense secretary.

The top candidates for CIA director, to replace David Petraeus who stepped down over an extramarital affair, are thought to be Michael Morell, currently acting CIA director, and John Brennan, a top counterterrorism adviser to Obama and a former CIA official.

(This story is corrected to fix year in paragraph 23 to 1998 from 1988)

(Additional reporting by Tabassum Zakaria; Editing by Vicki Allen and Eric Beech)

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