Treasury Sec. Resigns

Treasury Secretary O'Neill Announces Resignation
Economic Adviser Lindsey Also Quits in White House Shakeup


Staff and Wire Reports
Friday, December 6, 2002; 10:12 AM


The top two members of President Bush's economic team announced their resignations Friday morning at the request of the White House, according to sources.

Paul O'Neill, whose outspokenness won him praise as a captain of industry but often landed him in hot water as President Bush's treasury secretary, announced his resignation in a letter to the president Friday morning. White House economic adviser Lawrence Lindsey then submitted his resignation, White House officials said.

Sworn into office on Jan. 20, 2001, O'Neill is expected to leave office within the next few weeks. During his time as treasury secretary, O'Neill's blunt-speaking style served as a lightning rod for detractors and sometimes could even make his supporters wince.

He is the first member of Bush's Cabinet to leave.

"It has been a privilege to serve the nation during these challenging times," O'Neill said in a letter to the president. "I thank you for that opportunity."

Stocks cut opening losses and wobbled near unchanged Friday as the resignations helped take the sting out of a disappointing unemployment report for November.

"I think the resignations are a good thing for the economy," said Bill Strazzullo, market strategist with State Street Global Markets. "I don't think the market had much faith in O'Neill because of his inability to articulate a strategy for the dollar and his general ineptness."

O'Neill's two years at Treasury were peppered with controversy.

O'Neill, who left his job as chairman of Alcoa, the world's biggest aluminum maker, to take the Cabinet post, touched off a furor when he said he would keep nearly $100 million worth of stock in the company. Under fire by critics about potential conflicts of interest, he eventually reversed course and sold the stock.

As the president's chief economic spokesman, he was frequently criticized as being either too enthusiastic about the economy's prospects and the stock market or too ho-hum.

When Wall Street reopened after the Sept. 11, 2001, terrorist attacks, O'Neill turned into an economic cheerleader, predicting on Sept. 17 that the Dow Jones industrial average could be approaching all-time highs within 12 to 18 months.

As the stock market melted down that day, O'Neill declared that "the people who sold will be sorry that they did it." He also pooh-poohed the notion that the economy could be headed into a recession. It was.

Just months after he took office, O'Neill had taken the opposite approach. Following the first trading day after the Dow Jones index in the spring of 2001 suffered its worst week of declines in 11 years, O'Neill offered this comment to millions of investors: "Markets go up and markets go down."

From the beginning, he suffered in comparison to one of his predecessors, Robert Rubin, who held the post under President Clinton and was highly thought of on Wall Street.

Early in his term, O'Neill's mixed comments on the U.S. dollar rattled currency markets and perplexed currency traders. He described traders as people who "sit in front of a flickering green screen" all day and were "not the sort of people you would want to help you think about complex questions.

O'Neill once characterized a House Republican economic stimulus package as "show business," prompting one GOP congressman to call for his resignation.

After Bush imposed hefty tariffs on imported steel in a bid to help ailing U.S. steelmakers, O'Neill gave a speech that cast a cloud over the tariffs, saying they weren't a long-term solution for the industry's woes. The tariffs, he suggested, would endanger more jobs in steel-using industries than they would protect among steelmakers.

On the collapse of energy giant Enron Corp., O'Neill said: "Companies come and go. It's ... part of the genius of capitalism." He said then he never considered intervening in Enron's spiral toward bankruptcy even though hundreds of Enron employees, whose 401(k) plans were invested heavily in company stock, lost their retirement savings when the value plummeted.

"I would say that I am not troubled by ruffling some feathers because I think I have been true to what I believe and what I think is right," O'Neill once said.

A bitter, 15-minute verbal duel between O'Neill and Democratic Sen. Robert Byrd of West Virginia over each man's hand-to-mouth beginnings made front-page headlines. Byrd suggested that O'Neill by virtue of his status as a Cabinet secretary and a former corporate titan was out-of-touch with the needs of the average American.

"I started my life in a house without water or electricity," snapped O'Neill who grew up poor in St. Louis, Mo. "So, I don't cede to you the high moral ground of not knowing what life is like in a ditch."

He started his professional life as a computer systems analyst with the Veterans Administration in 1961.

He climbed the ranks - taking a year off to acquire a Master's degree in public administration at Indiana University. He became deputy director of the Office of Management and Budget in 1974 in the Ford administration.

That's where he met Dick Cheney, who as Bush's vice president suggested O'Neill for the Treasury post, and Alan Greenspan, with whom he forged a lasting friendship.

He joined International Paper Co. as a vice president in 1977 and by 1985 he was president. O'Neill left the company to become chairman and CEO of Alcoa in 1987. His turnaround of the aluminum giant was studied in business schools across the country.

O'Neill said Greenspan played a major role as an Alcoa board director in picking O'Neill for the Alcoa job.

For O'Neill's 66th birthday last year, Greenspan showed up at an impromptu birthday party, offering a show of support on a day when a New York newspaper reported that O'Neill would soon be forced to resign.

This abusive pounding that comes with the territory gets a little wearisome," O'Neill said. "If you didn't campaign for the job, there is a feeling some days of who needs this."