No Shortage of Candidates, Scenarios

Who will succeed Paul H. O’Neill and take command of President Bush’s economic program?

Phil Gramm, the recently retired Texas senator and champion of unfettered free markets? Robert B. Zoellick, Bush’s trade representative and a respected political strategist? Commerce Secretary Don Evans, an old friend of the president?

With no front-runner emerging, these were among the names floated Friday in Washington and on Wall Street.

Others tossed out by business and political leaders were those of R. Glenn Hubbard, chairman of the White House Council of Economic Advisors; former Texas Rep. Bill Archer; Carla Hills, trade representative in the first Bush White House; and Gerald Parsky, an L.A. businessman and Bush’s top political operative in California.

Some suggested that Bush may turn to Wall Street, as President Clinton did in 1994 in tapping Robert E. Rubin, a longtime Goldman Sachs executive, to replace Lloyd Bentsen when the stock market was having a down year.

“Trading Bentsen for Rubin was picking somebody with the explicit backing of Wall Street, and Wall Street loved it,” said Vincent Boberski, strategist and chief economist for RBC Dain Rauscher in Chicago. After a flat year in 1994, the stock market enjoyed its strongest five-year rally in history.

Analyst David Gergen, who has advised four presidents and now teaches at Harvard University, said Bush now must pick someone who can command the confidence of Wall Street.

“People in the financial houses knew very little about George W. Bush and his people,” Gergen noted, as Bush did not court Wall Street as assiduously as most GOP presidential candidates because he was already flush with private contributions during his 2000 campaign.

“Then he reached out to a maverick CEO and an academic,” Gergen said, alluding to O’Neill’s past job as chief executive of Alcoa and former Harvard professor Larry Lindsey, who also resigned Friday as Bush’s economic advisor. “Now he will turn to someone gold-plated.”

Stephen Friedman, a former co-chairman of the Goldman Sachs investment firm, is the favored candidate for Lindsey’s job at the White House.

For the O’Neil job, figures from the investment world whose names were circulating included John M. Hennessy, former CEO of CS First Boston Inc.; Joseph J. Grano Jr., head of UBS Paine Webber in New York; and investment counselor Charles Schwab.

Harvard economists Martin S. Feldstein and N. Gregory Mankiw also were mentioned. Feldstein, President Reagan’s top economic advisor, has long espoused using tax cuts to stimulate the economy, a view that sits well with the Bush administration.

White House political director Karl Rove contributed to speculation that Evans would get the job by making calls last week suggesting the former Texas oil executive was preparing to move up in stature, said a source who had talked with Rove.

Other sources advised against putting too much stock in Evans. And a spokesman for Evans said that his boss “loves his job as secretary of Commerce.”

The new Treasury secretary will not only have to navigate the politically treacherous waters of Washington but deliver on Bush’s goal of stimulating the economy while cutting taxes and reducing the government’s burgeoning budget deficit.

The government’s chief financial officer also must restore confidence in the markets shaken by scandals at Enron, WorldCom and other big companies, while going about the more mundane business of the Treasury Department, such as manufacturing coins and currency.

“The president is going to look for people who are expert in the marketplace, in financial matters, that have the confidence of the marketplace, a knowledge of government service, and are well versed in both fields,” White House Press Secretary Ari Fleischer said.

Greg Valliere, chief strategist for Schwab Washington Research Group, said O’Neill’s successor needs to be able to “spin the administration story better than O’Neill did, needs to have a better feel for global and domestic markets than O’Neill did, and needs to have solid Republican support on Capitol Hill.”

Some suggested that the next secretary should avoid O’Neill’s penchant for off-the-cuff remarks, while others regarded his candor as refreshing.

“More of his unreserved honesty is needed inside the Beltway,” said Sen. Charles E. Grassley (R-Iowa), new chairman of the Senate Finance Committee.

Russell Roberts, an economist at Washington University in St. Louis, said Bush needs to name someone “who’s identified with an idea.”

“It’s not enough to have skilled people,” he said. “You’ve got to have people with ideas and who are passionate about those ideas.”

Gerald Epstein, an economics professor and co-director of the Political Economy Research Institute at the University of Massachusetts, said the Bush administration will want a “good bond salesman: someone who can sell the enormous U.S. debt that will accumulate as they fight a war against Iraq ... while at the same time cutting taxes.”

Rep. Charles B. Rangel of New York, the top Democrat on the tax-writing House Ways and Means Committee, said Bush should pick “someone who can hit the ground running, who’s studied the problems we face.”

Rangel said he had no confidence that the administration would choose a candidate Democrats could embrace. “We haven’t heard anything except, ‘Cut corporate taxes,’ ” he said.

Zoellick, who was among those most prominently mentioned, was a Treasury Department official during the Reagan administration. He helped the Bush administration win congressional approval this year of legislation expanding the White House’s authority to negotiate trade pacts.

Gramm, a onetime economics professor and former chairman of the Senate Banking Committee, recently went to work as vice chairman of UBS Warburg. He declined to comment Friday.

Rep. Robert T. Matsui (D-Sacramento) said the president needs “somebody who has a pragmatic grasp about what to do about the economy.”

Retiring House Majority Leader Dick Armey (R-Texas) put to rest any notion that he was interested in the job. “I’m just leaving the best job in Washington,” he said. “I gave it up for something better: my wife.”

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Times staff writers Nick Anderson and Edwin Chen contributed to this report.