Analysis: New face same woes for Treasury?

By SHIHOKO GOTO, UPI Senior Business Correspondent  |  Dec. 9, 2002 at 3:38 PM
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WASHINGTON, Dec. 9 (UPI) -- Few were surprised when Treasury Secretary Paul O'Neill and White House economic adviser Lawrence Lindsey were booted out by President Bush last Friday, but it remains to be seen whether their replacements will fare better in revving up the U.S. economic engine and winning over Wall Street's confidence.

At first blush, however, it seems that the personnel change will be more of the same in terms of both personality and policy.

Admittedly, Bush's decision Monday to nominate railroad executive John Snow for the top economic post so quickly highlighted just how concerned the administration now is about ensuring economic stability. Yet, there are growing concerns that Snow is uncannily like O'Neill, with both men being leaders of big conservative companies, and thus could face the same problems that the former Alcoa chairman confronted.

One of O'Neill biggest problems was that unlike some treasury secretaries, most notably Robert Rubin, he was unable to gain the confidence of Wall Street at a time when financial markets have been badly shaken by the dot-com collapse and rattled by concerns about corporate governance, not to mention wariness about the war on terrorism hurting the economy.

Like O'Neill, the 63-year-old Snow, who is chairman of CSX Corp., one of the largest railroad companies in the United States, has no experience in the financial sector. He also has no background in the international arena, at a time when U.S. leadership in the global economy remains critical as all major industrialized nations continue to face considerable downside risks. Meanwhile, like the former Alcoa chairman, Snow has strong ties to the Bush dynasty and also served in a number of posts under the Ford administration, during which now Vice President Dick Cheney was chief of staff.

Indeed, wariness about the uncanny parallels between Snow and his predecessor has been one key factor in pushing down the stock market nearly 1.5 percent since Bush made his announcement at the White House late morning Monday.

Nevertheless, there are a number of differences between Snow and O'Neill that stand out. For one, Snow has a Ph.D in economics, having taught at the University of Virginia, while O'Neill was lacking in similar academic credentials. More recently, Snow was a former chairman of the Business Roundtable, an association of chief executive officers from leading companies across the nation, a post that has allowed him to represent the private sector in Washington policy debates.

Such a background will allow Snow to be "a superb member of my Cabinet," Bush said, adding that the nominee will be a "key adviser on the economy and a key advocate ... for growth and jobs and wider and more international trade."

Another point that Bush emphasized was Snow's outspokenness in cracking down on corporate malfeasance, which he has been since the collapse of energy trading giant Enron Corp.

Both Bush and Snow, in the joint news briefing, stressed that the U.S. economy remains strong fundamentally, and both highlighted the need to bolster the job market and also pointed out the need to continue cutting taxes as a means to ensure steady growth.

The need for solid economic policy that can match up to the Bush administration's strong foreign policy team, is undeniable. With unemployment at 6 percent and continued fears that a double-dip recession is looming, Bush will be looking hard to push through an economic stimulus package that includes tax cuts as well as increased spending, to beef up growth prospects.

For that, the administration will be requiring Snow not only to understand the White House's policy proposal, but also to push them through Congress, both of which O'Neill had difficulties with.

Snow's background "will help government and business meet the twin challenges of protecting our homeland while growing our economy ... he is respected by business executives, government officials and market leaders. He is well suited to press American companies to invest and grow now, while continuing the effort towards improved corporate governance," stated U.S. Chamber of Commerce President Thomas Donohue.

Meanwhile, Goldman Sach's Washington analyst Joan Woodward echoed Dohonue's sentiment, declaring Snow a "good choice," particularly in pursuing fiscal spending issues.

Of course, Snow's appointment depends on Senate approval, which Bush said he hoped would be forthcoming as soon as possible. While O'Neill will be staying on as treasury secretary until the end of the year, the administration will be eager to have Snow confirmed quickly, especially as the budget for next year is expected to be put forward by early February. Goldman's Woodward pointed out that Bush may well try to get Snow approved before the State of the Union address in late January.

Meanwhile, Bush is expected Tuesday to nominate Stephen Friedman, a former co-chairman of investment group Goldman Sachs, as the chief White House economist to replace Lindsey. That position does not require Senate approval, but the former investment banker will need to go through an extensive background check before his appointment is confirmed.

Wall Street seems more upbeat about Friedman's appointment than Snow's, however, given that he is one of their own and more likely to understand the needs of the financial markets. Friedman will be acting as a much-needed bridge between investors and the White House.

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