A ‘Wait and See’ Reaction to Treasury Nominee Snow

Some people were expecting a new Treasury boss with closer ties to Wall Street or Capitol Hill. Some were hoping for a well-known apostle of supply-side economic policy. Some just wanted a more familiar face.

Instead, President Bush gave them railroad executive John W. Snow, and many weren’t quite sure what to make of it.

In Washington, New York and other centers of power, the initial take on the retooling of Bush’s beleaguered economic team was generally favorable but noticeably restrained.

“We live in an uncertain time, with terrorism and war and airline bankruptcies, and having an unknown quantity just increases that uncertainty,” economist Brian Wesbury said. “We’re going to have to wait and see.”

Bush announced Monday that he was nominating Snow -- who is chairman, president and chief executive of rail operator CSX Corp. -- to replace Paul H. O’Neill, who is resigning after a troubled two-year tenure as Treasury secretary.

The president is expected to announce as early as today his choice of Stephen Friedman, former co-chairman of investment firm Goldman, Sachs & Co., to succeed Lawrence B. Lindsey as chairman of the White House’s National Economic Council.

O’Neill and Lindsey were shown the door Friday as the White House tries to counter criticism that its policies and personnel have not helped the nation recover rapidly enough from the economic downturn.

Many in Bush’s camp expressed hope that Snow and Friedman would do a better job of articulating the president’s economic agenda than had their predecessors.

Job No. 1, they said, would be selling a new package of proposed tax cuts that will be largely in place by the time they report for work.

“For the next three to six months, they have one thing on their plate, and that is to polish up and shepherd through the new tax cuts,” said Wesbury, chief economist at the Chicago investment firm Griffin, Kubik, Stephens & Thompson. “I hate to call them glorified salesmen, but that’s going to be their job.”

Bush’s economic appointments failed to dispel the general gloom in the financial markets Monday. Stock prices declined sharply as traders reacted to the bankruptcy filing of United Airlines parent UAL Corp. and downgraded earnings forecasts for IBM Corp. and Wal-Mart Stores Inc.

In the view of some Wall Street regulars, the new team looks a lot like the old team. Snow, like O’Neill, is a Ford administration alumnus and a captain of old industry. As chairman of the Business Roundtable, Snow lobbied for deficit reduction, a stance that might conflict with the push for more tax cuts. Friedman, for his part, is a director of the Concord Coalition, a watchdog group that advocates balanced budgets.

“The overall message of Snow and Friedman is continuity, and the markets are struggling with that,” said Lehman Bros. chief political analyst Kim Wallace. “Based on what happened Friday, people thought they were going to get two strong spokesmen for opening the back door of the Treasury until this economy is growing at 5% again, no matter what the cost. Those expectations were dashed this morning.”

Republicans in Washington, for the most part, were jubilant at the prospect that the Bush economic plan finally will have effective spokesmen.

“This will hopefully be the answer to the cavalry call we’ve been waiting for,” said House Deputy Majority Whip Mark Foley (R-Fla.).

Even Democrats were generally complimentary, saying they were more concerned about the contents of Bush’s economic policy than with the personnel who promote it.

“I think it is encouraging that the president is reaching out to people of experience,” said Senate Majority Leader Tom Daschle (D-S.D.). “But it isn’t the names, it’s the plan that is of concern to us. Trickle-down economics doesn’t work.”

Sen. Jon Corzine (D-N.J.), who worked with Friedman for 10 years at Goldman Sachs, characterized his former colleague as “a pragmatic, thoughtful individual” who would present both sides of issues. He called Snow a disciplined manager who would be “formidable in his presentation of the president’s case.”

U.S. Chamber of Commerce President Thomas J. Donohue praised Snow’s service on commissions that promoted reforms in corporate governance. National Assn. of Manufacturers President Jerry Jasinowski predicted that Snow would be a strong advocate of U.S. exporters. New York Stock Exchange Chairman Richard E. Grasso said Snow’s “balanced mix” of experience with CSX, the Business Roundtable and the Ford administration would serve him well as Treasury secretary.

On Wall Street, some investors may take comfort in the perception that Snow and Friedman are deficit hawks, said Tobias Levkovich, equity strategist at Salomon Smith Barney in New York. The bond markets in particular tend to fear large deficits because they put upward pressure on interest rates and inflation.

“This is a politically savvy move,” Levkovich said. “It suggests the president is choosing people who will support his economic stimulus program without coming off as irresponsible with the deficit.”

Market experts said reaction to Bush’s choices was muted because Snow and Friedman are regarded as unlikely to bring dramatic shifts in policy. Some said traders are less concerned with the identity of the administration’s front men than with the details of the tax cut package.

“By and large, Wall Street doesn’t really know what to expect from these guys,” said Jim Paulsen, chief investment officer of Wells Capital Management in Minneapolis. But “it’s not that big a deal because most of the agenda is going to stay the same regardless of who takes those posts.”

“Frankly, there’s still some question as to who these two people are,” said Hugh A. Johnson Jr., chief strategist at First Albany Corp. “They’re known, but not well known.”

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Vieth reported from Washington and Mulligan and Hamilton from New York. Times staff writer Nick Anderson in Washington contributed to this report.