WASHINGTON – After months of speculation, U.S. Treasury Secretary Paul O'Neill abruptly announced his resignation Friday in an apparent shakeup of President Bush's economic team amid concerns about the ailing economy.
White House economic adviser Larry Lindsey also stepped down, a move that was more widely expected.
Both Lindsey and O'Neill "served the White House and the nation ably and well," White House spokesman Ari Fleischer said Friday, quoting Bush.
Regarding possible replacements, "the president is going to look for people who are expert in the economy, who have [the] faith and confidence of the markets and people who are leaders of experience and judgment," Fleischer said.
He said Bush will "cast a wide net" in the search for successors, but noted that Bush has a often promoted from within government for top people.
Glenn Hubbard, head of the White House Council of Economic Advisers, has previously been mentioned by analysts as a possible replacement for Lindsey at the head of the National Economic Council.
Former Federal Reserve Governor Wayne Angell, an earlier candidate for the top treasury post, has been holding private meetings with Vice President Dick Cheney in recent months. Republican sources said Cheney has played a leading role in the economic team's composition.
Several other names have been mentioned, including discount brokerage king Charles Schwab, New York Stock Exchange Chairman Dick Grasso and former General Electric Chairman Jack Welch.
Friday's actions seemed aimed to help inoculate the White House against what could be a key vulnerability during the 2004 election presidential election season -- a public view that the shaky economy was not in skilled hands.
Fleischer did not deny suggestions the resignations represented a White House housecleaning. But he said Bush did not blame either departing official for less-than-hoped-for economic performance.
Stocks rose in late-afternoon trading Friday as investors bet the shakeup will usher in fresh solutions for the slow-growing economy.
Major market gauges had fallen by more than 1 percent immediately after a surprisingly weak report on the November job market, but erased losses as word of the resignations filtered throughout Wall Street.
"People didn't have all the faith in the world in O'Neill. They weren't convinced the Treasury had its act together," said Sean Kelly, an equity trader at Merrill Lynch. "This is similar to what happens in a corporation -- when they restructure, things get better."
"The feeling is that the person who will be appointed will probably be an improvement from the perspective of the financial markets (because) they would focus on getting the economy growing at a faster rate," said Joseph Stocke, chief investment officer at StoneRidge Investment Partners. "There was a feeling that things weren't going as well as they should have and a change should improve that."
O'Neill, who turned 67 on Wednesday, was considered to be on relatively solid ground since he was leading the administration's effort to reform the nation's tax code.
He had a one-on-one meeting with Bush last week, immediately upon returning from a grueling 12-day trip to Southwest Asia. The session was allegedly to talk about tax reform, though administration officials afterward declined to comment on the topics discussed.
But 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.
His two years of service were strewn with controversy, with various members of Congress and others within the federal government urging him to leave the Cabinet.
From the beginning, he suffered in comparison to one of his predecessors, Robert Rubin, who held the post during most of the Clinton presidency and was highly thought of on Wall Street.
O'Neill, who left his job as chairman of Alcoa, the world's biggest aluminum maker, to take the Cabinet post, first 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 reversed course and sold his Alcoa stakes.
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 the Monday after the Sept. 11, 2001, terrorist attacks, O'Neill turned into an economic cheerleader, predicting that the Dow Jones industrial average would be hitting all-time highs within 12 to 18 months.
As the stock market melted down later that same 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 was heading into a recession. It was.
O'Neill had taken the opposite approach just after taking office. In the spring of 2001, after the Dow had 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."
Paul H. O'Neill started his professional life as a computer systems analyst with the Veterans Administration in 1961.
He earned a master's degree in public administration at Indiana University and became deputy director of the Office of Management and Budget in 1974 in the Ford administration, where he met Dick Cheney, who suggested O'Neill for the Treasury post.
At the same time, O'Neill also met now-Federal Reserve Chairman Alan Greenspan, with whom he forged a lasting friendship.
Reuters and The Associated Press contributed to this report.