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Treasury Secretary O'Neill to Resign
Aired December 6, 2002 - 09:59 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: Let's go back to our top story this morning, that being the word of these resignations that have come out of Washington -- that of Treasury Secretary Paul O'Neill, as well as, according to the Associated Press, President Bush's economic adviser, Larry Lindsey.
Let's go and check in now with -- who do we have? I'm sorry, we have Tim O'Brien, who is standing by in Washington. Forgive us, folks. We've got a lot on the air right now. He's got the latest for us on these resignations and possibly a look at what this might mean for the markets this morning.
Tim -- good morning.
TIM O'BRIEN, CNN CORRESPONDENT: Good morning, Leon.
Well, there's quite a shakeup in the White House economic team. We can confirm that both Treasury Secretary Paul O'Neill and the chief economic adviser, Larry Lindsey, will both be leaving, probably in the next few weeks. We understand that O'Neill was asked to go, and that Lindsey was encouraged to go -- this from senior White House officials.
In his letter to the president, O'Neill does not give any reason for his resignation, but he does express his appreciation for the opportunity to have served.
There had been considerable speculation, not only about O'Neill, but about the entire White House economics team, raising the question now: Who might be next?
O'Neill had been the administration's point man on the economy. No one is really happy with where the economy is going or, more to the point, where it has been. The former CEO of Alcoa, he did bring a strong business background to the job, but also the independence of a CEO. He disagreed with the White House on a number of critical issues, tariffs on steel imports among them. And that disagreement -- that conflict did not sit well with many at the White House.
O'Neill tended to be optimistic about the economy. Some saw that as cheerleading; others saw it as being oblivious to reality. There had been rumors he might be asked to leave for some time.
In his letter to the president, a very short, curt letter, O'Neill writes: "I hereby resign my position as secretary of the Treasury. It has been a privilege to serve the nation during these challenging times. I thank you for that opportunity. I wish you every success as you provide leadership and inspiration for America and the world." That's it.
A spokesman at the Treasury Department says the departure will take effect in the next few weeks -- Leon.
HARRIS: Well, Tim, you said a moment ago, someone else might be next. Who might be next? Is there any talk right now about who might be next if there is going to be another shoe to drop here?
O'BRIEN: This struck like a bolt of lightning in the night, and I think it's caught many by surprise. I would be surprised if any announcement is made today as to a successor. It may take several weeks. But I do think the administration, particularly this administration, will be looking for someone with a strong business background, and perhaps someone who can get along with Congress, who knows Congress.
When you talk about those qualifications, among the names that immediately spring to mind would be that of Phil Gramm, the former senator from George Bush's home state, Texas. Gramm has a doctorate in economics, a former chairman of the Senate Banking Committee. He tends to be uncompromising on some issues, and that might be an issue, can he deal with Democrats. But I think his name will be among those prominently mentioned.
HARRIS: Interesting. Thanks, Tim -- Tim O'Brien in Washington.
O'BRIEN: You bet.
HARRIS: Appreciate that.
Let's go down to New York now. We want to check with Jack Cafferty and Andy Serwer, who are standing by there to talk some more about this.
As you just heard Tim say, guys, this struck like a bolt of lightning out of the blue here. What are your thoughts this morning on this.
JACK CAFFERTY, CNN ANCHOR: I'm not sure it was so much unexpected. There was some talk a couple of weeks ago that the entire economic team -- Lindsey, O'Neill, all of them -- may be resigning by the first of the year, despite a two-month-long rally in the stock market, Andy, and some signs that the economy grudgingly is trying to recover here. Apparently, it was too little, too late to save the careers of these three guys.
And the question is: What are they going to do now, I suppose?
ANDY SERWER, EDITOR-AT-LARGE, "FORTUNE": Well, that's right. I mean, two out of three of them are gone now. Harvey Pitt being the first from the SEC, and now Treasury Secretary O'Neill. Will Larry Lindsey be the next one to go? That is the question.
A name I've heard bandied about to replace Treasury Secretary O'Neill might be Donald Marron, the ex-head of Paine Webber, other Wall Street names such as that you're hearing. But he really never did have the confidence of Wall Street from the very beginning, nor did he have the confidence of Republican leaders. And I think you're absolutely right -- there is Larry Lindsey, he's the last man standing of the three members of the team.
CAFFERTY: According to that little thing we had there, he's also going to resign.
SERWER: Oh, is that right?
CAFFERTY: The White House says that...
SERWER: They're cleaning house now.
CAFFERTY: Yes, they have asked for his resignation, and that was the rumor a couple of months ago...
CAFFERTY: ... was that the entire economic team was going to be eliminated and new blood brought in probably after the first of the year.
My question would be: How much impact realistically on a day-to- day basis do these people have? And is this the kind of thing that's done as much for political reasons and to create the impression that we're addressing perceived softness in the economy, et cetera, you know, and skullduggery on Wall Street, as we are realistically going to be able to do anything on a day-to-day basis to fix it?
SERWER: Well, it's interesting. We haven't had a head of the FDA, Food and Drug Administration, for quite a while now.
SERWER: We haven't heard about anyone coming in to fill the role of the head of the SEC. I mean, these jobs are not just ceremonial, Jack. I mean, I know where you're driving at. And at some point...
CAFFERTY: Well, but you know what I'm suggesting, yes.
SERWER: Yes, oh, absolutely. But at some point, you know, the president has a lot of jobs to fill. If that's accurate that Larry Lindsey is also out, that's three top economic jobs are unfilled. That's a lot of work to find three people to come in to fill those jobs.
HARRIS: Hey, guys, let me ask you this, since you bring that up, and it struck me that the timing here may also be important. Jack, you mentioned the fact that there had been a lot of pressure and a lot of heat applied to this administration about this issue back over the summer and back when corporate malfeasance was the topic of the day, and all of the questions that were raised about Harvey Pitt as well. It strikes me as odd that this is happening after the elections and it didn't happen during the summer.
CAFFERTY: Well, you know, I don't know the answer to that. One of the things that occur to me is that they're announcing all of this on a Friday at about 10:05 Eastern Time in December, a couple of weeks before Christmas. How quickly -- how much pressure is on the White House to get the replacements named and trotted out in front of the public and the media, so they can begin building the case that next year is going to be better than this year?
HARRIS: Speaking of building the case, President Bush has got a really ambitious agenda if he's going to try to get these tax cuts made permanent, address Medicare, prescription drug benefits and whatnot. The kind of person who is going to be needed to, I guess, do the cheerleading or lead the way in selling these kind of packages to the country, that is going to be a big issue here as well, will it not?
CAFFERTY: Let me ask Andy something. Harvey Pitt, to my way of reading the financial pages, kind of took a bullet. The regulation of the kind of stuff that happened at Enron and WorldCom, the potential for that hasn't really been removed. The fact that it happened on his watch, somebody had to take the fall for that stuff, and he did.
CAFFERTY: And maybe these other resignations are related to that. But as a practical matter, if Enron wants to do the kind of stuff that it did, Harvey Pitt was probably not in a position to have prevented it, was he?
SERWER: Well, I think that's probably true, Jack. And of course, a lot of that malfeasance occurred during the time of the previous administration, for goodness sakes, while Arthur Levitt was the head of the SEC. But if you look at the other parts of the economy -- the dollar is weak, unemployment is now rising, the stock market is down even though we have come back a bit, and the overall economy is weak, we may or may not be in a recession, according to the technical definitions.
So, I think that the fact that we have these overseas problems in terms of Iraq and al Qaeda has sort of masked and let the president let these guys sort of bumble along a little bit, if you will.
SERWER: And now, finally, the president has acted and removed these two people, all three, actually, now -- the head of the SEC, his chief economic adviser and the Treasury secretary.
CAFFERTY: How urgent is it, do you think, for them to name the replacements? I mean, this is something, it would seem to me, they'd have to do quickly.
SERWER: Well, I think it is, but on the other hand, they haven't acted as quickly as we thought with the head of the Securities and Exchange Commission. So, you know, we're heading into the holidays here. You know, you've got to call three people up and get them approved. I mean, it's going to be a big job. HARRIS: Hey, guys, let me ask you -- you bring up the issue of the overseas activities right now, Andy, and thinking about Iraq and the possibility of war down the road. How does that play, you know, with what's going to happen with the economy, do you figure, with these resignations coming and war also on -- basically on the front porch now?
CAFFERTY: Well, if the Persian Gulf scenario is any sort of a precursor, a lesson I suppose looking back, Wall Street doesn't like uncertainty. They've been on tenterhooks, not only since September 11 of last year with the al Qaeda attacks on the World Trade Center, but then all of this saber rattling and war drum beating about Iraq. What's going to happen? Are we going to go to war or not? If we do, how long is it going to last, how much is it cost, et cetera, et cetera, et cetera?
The same kind of anxiety plagued the markets back in 1991 -- 1990, the fall of 1990 ahead of the Persian Gulf War.
CAFFERTY: But when the bombs began to fall and the questions were answered, the market, in fact, began to rally strongly, because the uncertainty had been cleared up. And once it was apparent that the allies were going to prevail in Desert Storm, Wall Street breathed a big sigh of relief, and people began to buy stocks again. Whether that happens again, I have no idea. But that's what happened the last time.
SERWER: And you know, Leon, I think we should mention, there is one rock in Washington still in place, and that is Alan Greenspan at the Federal Reserve.
SERWER: And he ain't going anywhere, at least for now. There is talk of him re-upping his tenure there.
I think the big issue, though, you guys, is restoring confidence, and that is a very, very tricky business. It's not a matter of money supply or interest rates. It's a matter of a feeling, and it's very hard to instill that. Bob Rubin did a very good job of doing that; then again, he had a very strong economic wind at his back.
So, it's very hard to tell if the rooster is making the sun come up here in terms of the economy. There's only so much that these types of people can do in these jobs.
CAFFERTY: You mentioned Rubin. I mean, in fairness to Mr. O'Neill, look at the guy he had to follow.
CAFFERTY: Nobody could have followed Rubin into that job. Rubin was a giant when it came -- he was probably arguably one of the best secretaries of the Treasury in the history country. SERWER: Yes.
CAFFERTY: Confidence may have something to do with the politics and the landscape in Washington. The Republicans control both Houses of the Congress now. If President Bush is serious about putting in place economic stimulus, about making tax cuts permanent and about doing other things related to the economy, he's got the political muscle to go ahead and get it done.
CAFFERTY: That was not the case the first two years when Tom Daschle and the Democrats controlled the agenda in the Senate.
HARRIS: I don't know if you guys can see the numbers right now, I've been watching as we've been sitting here talking about all of this. The numbers on Wall Street have seemingly turned around almost on a dime here. The Nasdaq and S&P are now in positive territory. They were negative just a little while ago, and now you see the Dow is climbing up.
Now, in fact, when it opened, it had gone down immediately down 120 points or so. And now, you see the Dow is only down 7-and-a-half points or so.
SERWER: Well, what an indictment that is, Leon. I mean, that's always the CEO's nightmare, when the CEO resigns and the stock goes up. I mean, here you have the president's chief economic advisers leaving, and the market's rallying on the news. Maybe that's saying something right there. Of course, you know, there are always other factors at play here, but it is interesting.
HARRIS: One of the factors...
CAFFERTY: One of the things that we just talked about is -- I'm sorry, Leon -- is the uncertainty that the Street doesn't like. And perhaps there was this sense...
SERWER: Very good point.
CAFFERTY: ... that they weren't getting it done, and there was no indication anybody was going to address it anytime soon.
CAFFERTY: So, you had that anxiety day after day. And now, all of a sudden, somebody has gotten resignations on the desk, and the Street is saying, hey, they're actually concerned about this and we're going to move forward. So, maybe some of the anxiety has been removed there on that issue.
HARRIS: Well, the hat trick has just been pulled, the Dow is now in positive territory. And this, considering the fact that we had some incredibly negative news come out on jobs this morning as well.
SERWER: Yes, I mean, absolutely. But as Jack said, you know, maybe it shows that the administration, the White House, Washington, is finally going to be doing something about the problem. I don't think, though, it's going to be so easy to fill those three jobs. Usually, you're looking for one guy in this situation. You're looking for three people now. I mean, that is a tall order.
CAFFERTY: Well, I guess the help wanted ads go out in "The Washington Post" over the weekend.
CAFFERTY: Treasury secretary, financial..
SERWER: Hey, you can move Harvey Pitt over to one of the other jobs.
CAFFERTY: Oh, no, no, no.
SERWER: No, that's not going to happen. That's not going to happen.
HARRIS: All right, we'll leave it at that.
CAFFERTY: Interesting day on Friday. Who says Fridays are slow in the news business?
HARRIS: Yes, exactly, exactly. Thanks, Jack. Thanks, Andy.
CAFFERTY: All right.
HARRIS: Jack Cafferty and Andy Serwer, appreciate it, guys. Have a good weekend, too, all right?
CAFFERTY: All right.
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