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Sunday, 8 December, 2002, 13:50 GMT
Bush to announce new economic team
US Treasury Secretary Paul O'Neill
Mr O'Neill was criticised for his plain-speaking approach
US president George Bush is preparing to announce a reshuffle of his economic team, following the surprise resignation of two key members last week.

(Mr O'Neill's) performance as treasury secretary has not inspired confidence

Hugh Johnson, First Albany Corp

US Treasury Secretary Paul O'Neill and White House economic adviser Lawrence Lindsey both resigned on Friday.

Weekend reports have suggested the White House will announce their replacements this week, and that key names on Wall Street could join the economic team.

Doubts had been raised over Mr O'Neill's suitability for the job, and he had upset some with his plain-speaking style.

The problems facing the US economy were highlighted again on Friday, when new figures showed a surprisingly large rise in the unemployment rate.

And the Sunday Times newspaper suggested the implications of the depatures "point to new official worries about the economy".

Poor fit

Observers had noted a split between Mr O'Neill and President Bush in recent weeks, most notably on extra measures to bolster the US economy's tentative recovery.

There was a bad fit between Mr O'Neill's style and the administration's style

Bruce Bartlett, former US Treasury official
Mr O'Neill appeared to be content to talk up the economy, while the Bush administration had been looking to accelerate tax cuts to give the economy a boost.

"The suddenness of his departure suggest that he's leaving over some disagreement or battle that he's lost in recent days," Bruce Bartlett, formerly of the US Treasury, told BBC's World Business Report.

"There was a bad fit between Mr O'Neill's style and the administration's style," said Mr Bartlett, who predicted Mr O'Neill's resignation some months ago.

"He has a way of putting things, sometimes, that we call foot-in-mouth disease.

"Some of his comments didn't seem to be very well thought through - perhaps he simply lacked the political skill to fulfil the job."

Weak economy

The weakness of the US economy had once again come under the spotlight earlier on Friday, when the US unemployment rate jumped to 6% in November, up from 5.7% the previous month.

White House economic adviser Lawrence Lindsey
Mr Lindsey: in the wrong place at the wrong time?
And the Reuters news agency quoted an unnamed official as saying that Mr O'Neill had quit "at the request of the White House".

Analysts have suggested that President Bush was keen to rid his team of perceived weaknesses in the run up to the 2004 presidential elections.

In his resignation letter to President Bush, Mr O'Neill said it had been a "privilege to serve the Nation during these challenging times".

White House press secretary Ari Fleischer said President Bush "very much appreciates the service of the Secretary of Treasury Paul O'Neill and Lawrence Lindsey to the White House and the country".

He added: "They've been leading the country from a period of recession to a period of growth."

Attention has now turned to who might replace Mr O'Neill and Mr Lindsey.

Don Evans, the current Commerce Secretary, has been mentioned as a possible replacement for Mr O'Neill, and former congressmen Bill Archer and Phil Gramm are also thought to be contenders.

Reuters also suggested the Californian financier Gerald Parsky and former Goldman Sachs chief Stephen Friedman as candidates for the economic adviser role.

Mr Friedman served as co-chairman of Goldman Sachs with the former US Treasury Secretary Robert Rubin.

Glenn Hubbard, the current chairman of the White House Council of Economic Advisers, has also been tipped to replace Mr Lindsey.


Mr O'Neill was sworn in as Treasury Secretary in January 2001, after leaving his post as chairman and chief executive of the aluminium maker Alcoa.

During his time in the post he came under attack for his direct style of speaking.

But he remained unmoved by his critics.

"If people don't like what I'm doing, I don't give a damn," he once said.

And his approach appeared to have the backing of President Bush.

"The president enjoys his blunt, plain-spoken approach," said Mr Fleischer last year.

Time to go?

His resignation was welcomed by some analysts.

"He's a very able person. But his performance as US treasury secretary has not inspired confidence," said Hugh Johnson, chief investment officer at First Albany Corp.

"I can't blame him for resigning and doing something more gratifying."

Analysts said that his resignation would not have a dramatic impact on the market.

"The financial markets have largely anticipated that the treasury secretary will not remain in his job in the coming year," said Lynn Reaser, chief economist at Banc of America Capital Management.

On Wall Street, the Dow Jones share index fell by more than 100 points in the first few minutes of trade, but it then recovered and closed up 22.49 points, or 0.26%, at 8,645.77.

Tax reformer

Lawrence Lindsey was one of the driving forces behind the $1.3 trillion tax cut which became the centrepiece of President Bush's election campaign.

But he was criticised, along with Mr O'Neill, for failing to inspire confidence in the economy.

"The economic troubles were being blamed on the messengers, and both O'Neill and Lindsey exuded zero confidence around the country when it came to selling the president's economic agenda," said Republican consultant Scott Reed.

Other observers said he was unlucky.

"I doubt that the president thinks less of his expertise ... it's just a case of being in the wrong place at the wrong time," said Republican consultant Charles Black

The BBC's Stephen Evans
"When the resignations were announced there was barely a blip in the markets"
Former US Treasury worker Bruce Bartlett
"He has not shown a great deal of leadership"
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06 Dec 02 | Business
29 Jul 02 | Business
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