Billionaire Forbes eyes Treasury post

WASHINGTON, Jan. 17 (UPI) -- Having failed twice to get the White House job, media mogul Steve Forbes now wants to head the U.S. Treasury. But while Washington's disgruntlement with the incumbent Treasury secretary may be intensifying, Forbes is up against some stiff competition to lead the country's economy -- if indeed the seat will be empty in the near future.

"The Bush economic team isn't focusing on the right questions ... I guess that guarantees that I want to be on it," the billionaire entrepreneur said Thursday at a briefing on the U.S. economy by the Republican-minded Club for Growth.

Forbes praised the Bush administration's foreign policy team and its efforts to combat terrorism, but he stressed that the administration's ability to steer the economy was sorely lacking in comparison.

In particular, Forbes was critical of Treasury Secretary Paul O'Neill's taxation policies as well as Federal Reserve Chairman Alan Greenspan's eagerness to cut interest rates while neglecting smaller-sized businesses that have been suffering from a credit crunch since the onset of recession last March.

Forbes is not alone in criticizing the Treasury and the Fed's handling of the U.S. economy after a decade of uninterrupted growth. And while Greenspan's seat is secure until his fourth term in office ends in June 2004, rumors that the knives are out for O'Neill have been rife since the early days of the Treasury Secretary taking office at the beginning of last year.

For one, O'Neill put up the backs of Wall Street investors early on by dismissing that a strong dollar is in the United States' national interest, and then for making grand projections about the stock market that even private-sector economists steered away from following the Sept. 11 attacks.

He has also come under attack for making statements -- notably on financing Argentina -- that were contradicted only a few weeks later, supposedly due to opposition from the White House.

In short, Washington insiders are frustrated that O'Neill is unable to work with Congress, particularly since he is seen as not representing the White House. A big blow for O'Neill was when Congress didin't call on him to discuss the impact of the terrorist attacks on the national economy. That task was given to Greenspan and former Treasury Secretary Robert Rubin.

While O'Neill's performance thus far may be far from stellar, it is questionable whether Forbes is better equipped for the job. Many on Wall Street point to Rubin, who was the second treasury secretary under the Clinton administration, as the best man on the job in recent years.

They cite Rubin's performance, his finger firmly on the pulse of Wall Street and unflappable demeanor giving confidence to financial markets rattled by the global meltdown of the late 1990s as well as the bankruptcy of the Long-Term Credit Management hedge fund. But Rubin's attempt, by his telephone call to the Treasury on behalf of Enron, to subvert the integrity of the rating agency process has shocked many and may cause his star to fall.

After all, Forbes has no experience as an investment banker, nor is he an economist. Moreover, his media empire is allegedly facing some hard times financially, although the full extent is unclear given that the company is not publicly traded.

At the same time, the billionaire faces some stiff competition from prominent public figures such as retiring Texas Sen. Phil Gramm and his wife, Wendy. Either one of the Gramms would have been strong candidates, given their strong connection to Bush and their economic backgrounds. But both are also strongly connected to Enron, with Wendy a director of the bankrupt company, while Gramm himself pushed forward legislation that favored the energy trading firm last year.

There also are potential candidates from Wall Street, including former Credit Suisse First Boston Vice-Chairman Jack Hennessy, UBS PaineWebber Chairman Donald Marron and Citigroup Chairman Sandy Weill.

Meanwhile, some Treasury analysts have suggested that White House economic adviser Lawrence Lindsey, a former Fed governor, would be up for the job as well.

All names that have been floated share Bush's basic philosophy of cutting taxes and spending, as well as passing a revised version of the economic stimulus package once Congress is back in session later this month. What is clear, though, that the treasury secretary must not only have the political connections as well as savvy, but also a sound knowledge of economics as well as the confidence of Wall Street, which may make Forbes one of the weaker candidates for the job.

But while those in Washington speculate on who might replace O'Neill, some Wall Street investors are not so sure they want him to go at all.

"What Wall Street likes the most is consistency and the lack of volatility," said Lehman Brothers' co-chief economist Ethan Harris. "What it doesn't want is a constant turnover."

Moreover, given that Bush appears to value loyalty above all else, O'Neill's seat may be secure for a while, at least until after midyear elections in November.