Lew, 57, who has overseen budget talks in times of surplus and deficits as a former budget director for Obama and former president Bill Clinton, was also a key player in the 2011 debt ceiling talks.
Opposition Republicans have criticised Lew for his uncompromising attention to detail and along with some people working on Wall Street have expressed concern about his lack of business and financial markets experience.
Announcing Lew's nomination at a press conference Thursday, Obama offered extensive praise for Geithner -- who he said history would recognise as "as one of our finest secretaries of the Treasury" -- and a ringing endorsement of Lew.
"I cannot think of a better person to continue Tim's work at Treasury than Jack Lew," Obama said.
"I trust his judgment, I value his friendship, I know very few people with greater integrity."
"Jack has the distinction of having worked and succeeded in some of the toughest jobs in Washington and the private sector," Obama said.
Lew is expected to play an important role in negotiations between the White House and the Congress over raising the government's borrowing limit. Unless the limit is raised by late February or early March, the federal government would be unable to pay all its obligations on time.
The US hit its $16.394 trillion limit Dec 31, and Treasury is already moving money around to buy time. A contentious debate over the issue in the summer of 2011 led to the US losing its top AAA credit rating and markets tumbled.
Looming budget cuts would be another contentious issue. As part of the fiscal cliff deal, Congress pushed back severe cuts to the federal budget by two months. They had been scheduled to kick in Jan 2 and are expected to lead to job losses and furloughs for federal employees.
(Arun Kumar can be contacted at arun.kumar@ians.in)
