[A-List] US: O'Neill, Lindsey Quit

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Top Financial News


12/06 11:48
O'Neill, Lindsey Quit as Bush Shakes Up Economy Team (Update7)
By Simon Kennedy and Brendan Murray


Washington, Dec. 6 (Bloomberg) -- Treasury Secretary Paul O'Neill
and White House economic adviser Lawrence Lindsey quit, clearing
the way for President George W. Bush to realign his economic team
amid a faltering recovery.

President Bush asked for the resignations, an administration
official said. The announcements came within minutes of each
other and followed news that unemployment reached a seven-month
high of 6 percent last month.

The resignations "pave the way to getting a new stimulus plan to
give the economy a kick-start," said Jim Glassman, senior U.S.
economist at J.P. Morgan Securities in New York. "It's
significant because it points toward renewed focus on short-term
stimulus for the economy."

The White House didn't name successors. Bush's economics team is
already lacking a Securities and Exchange Commission chairman
after Harvey Pitt quit in November.

O'Neill, criticized for an outspokenness that roiled financial
markets and offended Wall Street, and Lindsey will both leave by
year-end, the White House said.

Bush will "look for people who are expert in the economy, who
have the faith and confidence of the market, career experience
and judgment dealing with private markets and the private
sector," White House spokesman Ari Fleischer said.

The dollar had its biggest decline against the euro in five weeks
following the unexpected decline in U.S. payrolls and rise in the
jobless rate.

Losses were limited after the announcement about O'Neill, who
some investors fault for the slow recovery, resigned. U.S. stocks
recovered after the resignations. The Dow Jones Industrial
Average was down 11, or 0.1 percent, at 11:45 a.m. New York time
after falling as much as 1.4 percent. The Treasury's 4 percent
note maturing in November 2012 rose a half point, pushing down
the yield 6 basis points to 4.08 percent. A basis point is 0.01
percentage point.

Returning Home

O'Neill plans to return to his home in Pittsburgh and focus on
improving the city's heath care and education, Treasury
spokeswoman Michele Davis said. Lindsey will remain in the job
until the end of the year and then `"looks forward to returning
to the private sector," Fleischer said. "Successors will be
named. I'm not going to speculate about the timing."

"It has been a privilege to serve the nation during these
challenging times," O'Neill said in a letter today to Bush. "I
wish you every success as you provide leadership and inspiration
for America and the world."

In his 23 months as the nation's 72nd Treasury chief, the
self-described straight talker with a no-nonsense approach
generated criticism that the Bush administration lacked economic
leadership as it fought a sluggish rebound from recession. His
resignation came within an hour of the Labor Department
announcing that the unemployment rate reached 6 percent in
November, the highest in seven months.

"Candid" Approach

Throughout his tenure, Bush backed his chief economics spokesman,
saying he appreciated O'Neill's judgment and "refreshingly
candid" advice.

"I think doing the right thing is good politics," O'Neill
declared in June. "I don't know how to sort it out any other way,
and it's what I'm going to do until I get fired or pull the rip
cord. If people don't like what I'm doing, I don't give a damn.
I'm working on the inside of what I think is right."

His departure may slow Bush's effort to overhaul the U.S. tax
code, which the 67-year-old O'Neill was leading. The White House
loses the personal relationship between O'Neill and Federal
Reserve Chairman Alan Greenspan. The two met weekly to discuss
the economy and the government's fiscal position.

O'Neill's tenure was marked by calls for his resignation or
predictions of his imminent sacking by legislators, analysts and
a string of publications, including the New York Times and the
Wall Street Journal.

In nominating the former chief executive of Alcoa Inc. in
December 2000, Bush described O'Neill as a "steady hand" who
would be able to soothe financial markets. O'Neill pledged that
his days as a "free-ranging, self-admitted maverick" were over.

Both were wrong. Within two months O'Neill had sent the dollar
plunging by telling a German newspaper the U.S. didn't follow a
strong dollar policy, suggested Bush's tax cut wouldn't boost the
economy as much as the White House calculated and told Wall
Street traders he could learn their jobs in a few weeks.