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Treasury secretary resigns Original Source Link: (May no longer be active)
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Top Financial News
12/06 09:52
O'Neill Submits Resignation Letter to President Bush (Update3)
By Simon Kennedy and Brendan Murray
Washington, Dec. 6 (Bloomberg) -- Paul O'Neill, who brought corporate and government experience to the Bush administration and an outspokenness that roiled financial markets and offended Wall Street, Congress and foreign officials, said he is resigning as U.S. Treasury Secretary.
The resignation will take place in the ``next few weeks,'' Treasury spokeswoman Michele Davis said. President George W. Bush hasn't named a successor, which would be subject to Senate confirmation. The White House had no immediate comment.
After the announcement, the dollar weakened to $1.0087 per euro at 9:43 a.m. in New York from $1.0005 yesterday. It fell to 123.68 yen from 124.92.
``It has been a privilege to serve the nation during these challenging times,'' O'Neill said in a letter today to President 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.
The administration is ``going to move and pay a lot of attention to the economy,'' Senator Richard Shelby, the incoming chairman of the Banking Committee, told Fox News. ``That's probably what the Bush administration is signaling.''
Throughout it all, Bush backed the longtime friend of his father's, former President George Bush, saying he appreciated O'Neill's judgment and ``refreshingly candid'' advice.
Tax Code
``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.
German Newspaper
Both were wrong. Within two months O'Neill 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.
In response to criticism triggered by such remarks, O'Neill said his refusal to stick to scripts and his willingness to speak his mind proved he was an independent thinker trying to ``give people an education.''
``It's so much more useful to tell the truth,'' he said in September. ``I've decided, sometimes with considerable pain as a consequence, to say what I think as clear as I know how to say it.''
Defenders said O'Neill's assessments were often accurate even if they weren't always politically savvy. He questioned the virtue of steel tariffs and U.S. policy on Cuba even though such statements veered from the White House line.
Wall Street Relationship
The secretary's willingness to do political heavy lifting helped to keep him in the administration's good graces. In 2001, he drove Bush's tax-cut plan through Congress three months faster than lawmakers predicted. He visited 20 states in the two months before the Nov. 5 congressional elections, helping Bush retain Republican control of the U.S. House and win it in the Senate.
O'Neill's relationship with Wall Street deteriorated when he derided traders as ``not the sort of people you would want to help you think about complex questions.'' It didn't help when he traveled to Central Asia in July 2002, as the Standard & Poor's 500 Index posted its largest decline since the October 1987 crash.
O'Neill publicly preferred tours of factories for taking soundings of the economy over his occasional visits to New York.
``You can talk to all the great economists you want to, and that's kind of one level of abstraction that you need to know about, but it's no substitute for talking to people on the ground,'' he said. ``I'm a plant freak.''
Ties With Congress
O'Neill managed to offend other constituencies that traditionally are important to a Treasury secretary. He strained ties with Congress by initially refusing to divest almost $100 million of Alcoa stock. He described the efforts of his own party's legislators to bolster the economy as ``show business.''
Before an October 2001 Senate hearing, Bush reminded his Treasury secretary, ``Paul, don't go and be argumentative,'' O'Neill later recalled. Four months later he clashed with Senator Robert Byrd, a West Virginia Democrat, over who had the poorest childhood.
On the international stage, O'Neill stayed in character, stirring controversy. He pledged to end large financial bailouts for emerging market countries in crisis and then supported International Monetary Fund loans for Turkey, Argentina and Brazil.
He said Argentina had ``no industry to speak of,'' and he was pelted with eggs when he visited there. He twice sent Brazilian bonds reeling by saying fresh aid didn't ``seem brilliant'' and then suggesting the funds might end up in ``Swiss bank accounts.''
U.S. Economy
When the U.S. economy slid into a recession in O'Neill's first three months, he became the first Treasury chief to preside over a contraction since Nicholas Brady in the early 1990s. The terrorist attacks of Sept. 11 exaggerated the economy's slowing. On his watch, the federal budget fell into its first deficit since 1997, and unemployment rose to a 7 1/2-year high of 6 percent.
Through it all, O'Neill argued that the government should behave more like a private company.
``We simply do not produce value for our taxpayers anywhere near our potential, especially when compared to the way the very best private companies produce value for their customers,'' he said last September.
He claimed special standing for that position, having served three presidents before his business career. He worked in the Office of Management and Budget from 1967-77, through the Johnson, Nixon and Ford administrations, rising to deputy director under President Ford.
Business World
After leaving government, he made millions as an executive at International Paper Co. and Alcoa. In his 2001 financial disclosure, he reported assets valued between $67 million and $253 million, making him one of the wealthiest officials in the Bush administration.
O'Neill criticized the pace of lawmaking, calling the corporate environment from which he had come ``the real world.'' He tried with mixed success to introduce elements of it into the Treasury Department. He sought to improve productivity and motivate employees by emphasizing worker safety and moving staff from offices to cubicles.
O'Neill's business acumen and eagerness to buck convention did produce results. He refused to accept the 10-month timetable Congress had set for crafting an economic stimulus bill in 2001, forcing a $1.35 trillion package through in seven months.
He pared the length of time it took Treasury to close its month-end financial books to three days from several weeks. He persuaded international governments to boost the amount of grants made by the World Bank and crack down on financing of terrorism. A high-profile tour of Africa with the rock star Bono returned attention to the problem of the continent's poverty.
By the end of 2002, O'Neill planned to deliver Bush a report on how the U.S. could reduce the size of the tax code through simplification and remove measures that were burdensome to consumers and businesses.
For all his pugnacity, O'Neill sometimes showed a little frustration. On being introduced to a New Hampshire audience as the nation's 73rd Treasury secretary, he pointed out he was the 72nd and said, ``once is enough.''
A daily reminder of his rejection of the Washington trappings of power was his irritation with the swarm of U.S. Secret Service agents that followed him. To the dismay of his bodyguards, he drove himself to work each morning in his silver Audi sports coupe, often leaving his guards' van far behind.
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