by John M. Curtis
(310) 204-8700

Copyright December 7, 2002
All Rights Reserved.

ending a loud message to Wall Street, President George W. Bush began early Spring cleaning, firing Treasury Secretary Paul O'Neill and his chief economic advisor Lawrence Lindsey, after two years of lackluster of growth. Though neither O'Neill nor Lindsey had anything to do with the latest economic bubble that popped in March 2000, both paid the price. Heads must roll when managers don't put up the numbers. Three years of bad economic news—and $8 trillion in lost corporate and personal wealth—signaled it was time for a change. Former Treasury Secretary Robert Rubin was a tough act to follow for O'Neill, the silver-haired straight shooting former CEO of Alcoa Aluminum. Looking to 2004, Vice President Dick Cheney and senior advisor Karl Rove saw only negatives with the current management team. Growing fears about a sluggish economy—and the prospects of history repeating itself—prompted the purge.

      Every CEO—including the president—must hold upper management accountable for poor performance, regardless of whether the managers are truly at fault. Back in 1992, it's temping to blame Bush-41's loss on a bad economy. In reality, H. Ross Perot siphoned off 19% of the GOP or crossover vote, handing the election to Arkansas Gov. Bill Clinton. While it's better to be safe than sorry, "W" won't have the same problems unless Sen. John McCain (R-Ariz.) bolts the GOP and runs as an independent, like Rep. John Andersen (R-Ill.) in 1980—though Andersen didn't dent Ronald Reagan's landslide on election day. Blaming Gore's narrow defeat in 2000 on Ralph Nader's measly 3% is nonsense. Nader had far less impact than Perot in 1992. Still, the White House made a smart move getting rid of O'Neill and Lindsey. With unemployment hitting 6% and war with Iraq looking imminent, changing personnel was a good move.

      While the "new economy" crashed on O'Neill's watch, a smokestack mentality couldn't get things back on the right track. Cheney, who originally recruited O'Neill, showed his savvy—and shrewdness—pulling the plug. Judging by Wall Street's response, financial markets were pleased with the announcement. "It does not come as a surprise that the administration would make significant changes in its economic team . . ." said Carl Tannenbaum, chief economist for LaSalle Bank in Chicago, reflecting on the economy's anemic performance over the past two years. Biting his tongue, O'Neill finally showed some of his CEO talents. "It has been a privilege to serve the nation during these challenging times. I thank you for that opportunity," mindful of the political fallout for speaking his mind. Since taking office Jan. 20, 2001, O'Neill was never comfortable selling Bush's economic agenda, often rankling markets with acerbic remarks.

      Bush now faces the unenviable task of choosing a family loyalist or the kind of high-profile darling—like Robert Rubin—that Wall Street needs. With Security and Exchange Commission chairman Harvey Pitt already axed, the market craves stability and reassurance. Playing politics, "Firing its economic team is an overdue admission by the Bush administration that its economic policies have failed," said outgoing Sen. Majority Leader Tom Daschle (D-S.D.), getting in his licks following a drubbing on Nov. 5. Daschle knows that the economic malaise started in March 2000, 10 months before Bush took office. Yet O'Neill was never the best cheerleader for the job. This time around, White House must choose a Wall Street insider with solid salesmanship. Among the most high-profile, Goldman Sachs Chairman Stephen Friedman, California GOP power broker Geral Parsky and investment guru Charles Schwab come to mind. Both Friedman and Schwab have Wall Street credentials and name recognition.

      Choosing O'Neill's replacement won't be easy. Bush insiders may push retired House Ways and Means chairman Bill Archer (R-Texas), former Federal Reserve governor Wayne Angell, or retiring House Majority Leader Dick Armey (R-Texas) or Sen. Phil Gramm (R-Texas), all have solid backgrounds, but lack the razzle-dazzle Wall Street credentials of Friedman and Schwab. Like Kissinger's appointment to head a Sept. 11 commission, the selection should have maximum symbolic value. While Kissinger has his detractors, few public figures command his credibility. Likewise, the next treasury secretary and head of the SEC must also carry comparable PR heft. Whoever Bush picks, they'll have to sell his plans to cut more taxes and live with growing budget deficits. Like Clinton in 1992, Bush can't afford to allow Federal Reserve Chairman Alan Greenspan to call all the shots. Picking a Wall Street name brand is almost a must.

      Cleaning house, it's now up to the White House to pick the right successors to Treasury Secretary Paul O'Neill, chief economic advisor Lawrence Lindsey and SEC chairman Harvey Pitt. With the day of reckoning getting closer with Iraq, financial markets will need steady hands for the days ahead. Both Stephan Friedman and Charles Schwab possess the right credentials to reassure battered markets, and, more importantly, sell Bush's economic program over the airwaves. "I appreciate Paul O'Neill's and Larry Lindsey's important contributions," said Bush, graciously accepting resignations yet looking for a fresh start. Without robust stock market, the White House can expect growing deficits and unwelcome economic news. Unlike Greenspan, Bush must target the stock market by picking a treasury secretary with strong ties to Wall Street. Like a good CEO, Bush knows that nothing makes a point better than when heads roll—it's now time to get it right.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's a consultant and expert in strategic communication. He's author of Dodging the Bullet and Operation Charisma.

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