In normal times, there would be two big items in the press that are not now major news stories. First would be announcements of top cabinet appointments by the president-elect. Second would be the precipitous decline in the economy that threatens the new president with a recession early next year. The longer court battles prevent the first process from moving forward, the greater the odds that the second problem will grow worse.
Historically, presidents-elect have understood that naming a new Treasury Secretary is among their most important actions in the transition period. Bill Clinton’s appointment of Lloyd Bentsen as Treasury Secretary was his first cabinet choice, named on Dec. 10, 1992. Every other recent president has also made his Treasury choice no later than the second week of December. The latest was Jimmy Carter’s naming of W. Michael Blumenthal to the Treasury on Dec. 14, 1976.
The Treasury Secretary is always the president’s chief economic adviser. Saying so is no slight to the Council of Economic Advisers chairman and other important economic advisers a president may have. It is simple reality. Since the days of Alexander Hamilton, financial markets have always looked to the Treasury Secretary for guidance and reassurance about a president’s economic policy. And with financial markets in virtual free-fall, now is a particularly sensitive time for markets to be uncertain about the course of economic policy.
This limits Bush’s choices for Treasury Secretary, and increases pressure on him to name someone who may not necessarily be his first choice. That is what happened to Ronald Reagan in 1980. The collapsing economy convinced him that he needed a prominent Wall Street executive to calm financial markets dubious about his economic policies. This caused Reagan to turn to Merrill Lynch CEO Donald Regan to be Secretary of the Treasury. Although Reagan proved to be a loyal and competent secretary, he was not well known at the time to Reagan, who may have preferred to name someone more closely associated with his economic philosophy, such as Jack Kemp.
Something similar seems to be shaping up now for Bush. I have long believed that his first choice for Treasury Secretary would be Bill Archer, the retiring chairman of the House Ways and Means Committee. Archer is an old family friend who represents Bush’s father’s congressional seat. He is a tireless champion of tax cuts, dedicated free trader and committed advocate of allowing workers to privately invest some of their Social Security taxes — the three key elements of Bush’s economic program.
However, I believe that Archer’s chances of becoming Treasury Secretary have been damaged by the protracted post-election struggle, which is widely blamed for much of the weakness in the stock market. Insiders now suggest that Bush is leaning toward one of a trio of prominent Wall Street executives to head the Treasury: Walter Shipley of Chase Manhattan, Jack Hennessy of Credit Suisse First Boston and Donald Marron of Paine Webber. Others are suggesting that he should appoint a prominent Democrat to Treasury, echoing John F. Kennedy’s appointment to that post of Republican Douglas Dillon in 1960.
All three of the executives mentioned are well known, and each would probably make a fine Treasury Secretary. But to my knowledge, none are especially close to Bush, nor do any of them have Washington experience. In normal times, these would not be serious impediments. But in times like these, when the political atmosphere is more poisoned than usual, and much of the transition period has irretrievably been lost, I think there is more of a premium on a Treasury Secretary’s political skills than would otherwise be the case.
One idea floating around Washington is for Bush to name Federal Reserve Chairman Alan Greenspan as Treasury Secretary. Such an appointment would be universally cheered throughout Wall Street and Main Street, as well, and would not be unprecedented. During a time of economic crisis in 1979, Jimmy Carter sought to reassure markets by asking Federal Reserve Chairman G. William Miller to become his Treasury Secretary.
Should Bush nevertheless choose to name a Washington outsider to the Treasury, he must be sure to name most of the top sub-cabinet slots there as soon as possible. It is essential that Bush find people with solid political experience to be deputy secretary and fill the various under secretary and assistant secretary positions. The Under Secretary for International Affairs is particularly important, because that person oversees exchange rate policy. An excellent choice for this position would be David Malpass, top international economist at Bear Stearns, with long experience on Capitol Hill and at the Treasury and State Departments.
At this point, it is not known how far along Bush’s vetting process for cabinet secretaries is. Nor is it known when he will feel comfortable announcing whatever choices he has settled upon. But he has to know that background checks and the Senate confirmation process are difficult and time consuming under the best of circumstances. No matter how compressed the timetable is, however, Bush should not rush his Treasury choice. It is too important to risk appointment of the wrong person.