Bloomberg
Paul O'Neill - The Outcast!
Fri Dec 6 15:22:45 2002
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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.