The Telegraph
Since 1st March, 1999
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US economy top guns resign in shakeup

Washington, Dec. 6 (Reuters): President George W. Bush launched the biggest shakeup of his two-year-old administration today, pushing out gaffe-prone treasury secretary Paul O’Neill and top White House economic adviser Lawrence Lindsey.

O’Neill’s resignation, announced in a curt letter at treasury, ended a two-year tenure marked by ill-timed comments and criticism of the former industrialist’s ability to be the chief spokesman for the world’s biggest economy.

An administration official said O’Neill quit “at the request of the White House,” making him the first Bush Cabinet official to leave.

Less than an hour later, Lindsey, who is director of the National Economic Council, also tendered his resignation, which was more widely expected.

The actions seemed aimed at helping inoculate the White House against what could be a key vulnerability during the approaching run-up to the 2004 election presidential election season — a public view that the shaky economy was not in skilled hands.

Republican sources said Vice-President Dick Cheney, who helped recruit O’Neill for the treasury job, also played a key role in the shakeup. Cheney has been meeting economists for the past several weeks but was characteristically close-lipped about the nature of the discussions, so the resignations came as a surprise.

O’Neill, who turned 67 on Wednesday, was considered to be on relatively solid ground since he was leading the administration’s effort to reform the nation’s tax code.

He had a one-on-one meeting with Bush last week, immediately upon returning from a gruelling 12-day trip to southwest Asia.

The session was allegedly to talk about tax reform, though administration officials afterward declined to comment on the topics discussed.

O’Neill had always smarted at comparison between himself and market-savvy former treasury secretary Robert Rubin, with whom he was frequently and unfavourably compared.

But in the wake of his and Lindsey’s resignation, financial market participants sounded more relieved than shocked.

Confidence lacking

“It does not come as a surprise that the administration would make significant changes in its economic team given that the group had not been able to inspire the kind of confidence among investors and consumers that is required to set effective economic policy,” said Carl Tannenbaum, chief economist for LaSalle Bank in Chicago.

In his letter to Bush, O’Neill simply offered thanks and gave no hint that he was quitting at the White House’s request, as officials later confirmed was the case.

“It has been a privilege to serve the nation during these challenging times. I thank you for that opportunity,” O'Neill said in a brief letter to President George W. Bush.

Treasury spokeswoman Michele Davis told reporters the resignation would become effective “in the next few weeks”, adding that O’Neill had informed senior treasury staff of his decision this morning.

“As he told senior staff this morning, there are lots of other important things to do in life. Back in December of 2000, he was planning to retire and devote himself to improving health care and education in Pittsburgh. I'm sure he will return to those important projects,” she said.

O'Neill was sworn in as the 72nd US treasury secretary on January 20, 2001. While his often direct style of speaking raised eyebrows in Washington, he was also often seen as refreshingly candid.

But this style sometimes roiled financial markets and upset foreign governments.

The US unemployment rate shot up to 6 per cent in November and employers hacked their payrolls by the largest amount since February, the government said today in an surprisingly weak report that offered a troubling sign for the economy.

The weak data, coupled with the surprise resignations of O'Neill and Lindsey, rocked financial markets.

US stock markets opened sharply lower, while prices for treasury securities leapt. However, treasuries pared their gains and stocks their losses after the announcement of O’Neill's resignation. The jobless rate hit its highest level since April, vaulting threetenths of a percentage point from October’s 5.7 per cent, according to the labour department.

Private economists had been braced for a rise to only 5.8 percent.

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