Rubin resigns post at Treasury

Wall Street wizard has helped guide the surging U.S. economy

Deputy picked as successor

May 13, 1999|By Jonathan Weisman | Jonathan Weisman,SUN NATIONAL STAFF

WASHINGTON -- Treasury Secretary Robert E. Rubin, one of the brightest stars of the Clinton administration who helped guide the economy to unprecedented heights, announced his resignation yesterday, saying it was time to return to New York after more than six "all-consuming" years at the White House.

Rubin's departure was set for early July. President Clinton appointed Rubin's deputy, Lawrence Summers, as the next treasury secretary, replacing a Wall Street wizard with a sometimes prickly academic economist.

For months, rumors of Rubin's imminent departure had led Wall Street analysts to predict that the Dow Jones industrial average would fall 1,000 points on the day of his announcement. After plunging more than 200 points within minutes early yesterday, the Dow rebounded to close at 11,000, down 26 points on the day.

Clinton thanked Rubin, 60, for "his cool head and steady hand, his sharp mind and his warm heart," hailing him as the most effective treasury secretary since the nation's first, Alexander Hamilton.

"He built a spirit and a belief that we could actually make this economy what it ought to be for our people," Clinton said at a Rose Garden announcement. "That will be his enduring achievement, along with the fact that everybody believed as long as he was secretary of the treasury, nothing bad could happen."

Such praise, mixed with a touch of foreboding, came from Democrats and Republicans alike, who spoke of Rubin's deft handling of the economy, his timely interventions in financial crises abroad and his strict adherence to deficit reduction and cautious financial conservatism.

Only the most partisan Republicans were uncharitable. While sparing Rubin by name, House Majority Leader Dick Armey of Texas disparaged Clinton for "continuing his practice of politicizing a department that in the past put the nation's economic interests ahead of the political interests of the party."

Grover Norquist, a tax reform advocate and conservative adviser to former House Speaker Newt Gingrich, dismissed Rubin as an irrelevant "liberal Democrat" trying to take credit for an economic boom created by Federal Reserve Chairman Alan Greenspan and the Republican Congress.

Economic credibility

Few were so disparaging of the former co-chairman of the Wall Street giant Goldman Sachs. Rubin gave the young Clinton administration economic credibility when he arrived in 1993 as chairman of the president's newly created National Economic Council, and he maintained Wall Street's support when he took the helm of the Treasury Department in January 1995.

Wall Street executives and fiscal conservatives lauded his tenure at the department, during which the Dow skyrocketed 187 percent. Since Rubin accompanied Clinton to the White House, unemployment has dropped from 6.9 percent to 4.3 percent, a $255 billion budget deficit has turned into a $70 billion surplus, and inflation has virtually disappeared.

"He's probably the best treasury secretary we've ever had, or pretty close," said Bruce Steinberg, chief economist for Merrill Lynch.

Liberals singled out Rubin's dogged opposition to broad-based Republican tax cuts, his stalwart defense of the earned-income tax credit for the working poor, his work to restore welfare benefits to legal immigrants that were cut under a 1997 law, and his efforts to extend the treasury's reach into the inner city, with new community lending initiatives and tax breaks for urban business investment.

"The loss of Robert Rubin is huge. There's no denying that," said Robert Greenstein, executive director of the liberal Center for Budget and Policy Priorities.

Replacing Rubin

His replacement, pending an expected Senate confirmation, would pursue nearly identical priorities, and in some sense, Summers, 44, brings even more brainpower to the position. At 28, he was the youngest tenured professor in Harvard University history. In 1991, he left Harvard to become chief economist at the World Bank. He joined the Clinton administration in 1993 as undersecretary of the treasury for international affairs.

"There's no question Larry Summers can talk with any Nobel laureate on an even keel," said Donald Ratajczak, an economist at Georgia State University in Atlanta.

"Rarely has any individual been so well prepared to become secretary of the treasury," Clinton said.

Summers has worked closely with Rubin for years, and because he would adhere to Rubin's moderate, free-market approach to economics, most analysts predicted little impact on the economy. But Rubin's departure could bring the kind of partisan attacks on administration economic policy that have beset Clinton in other areas.

Some policy experts say quietly that Summers lacks Rubin's uncanny humility, his lines of communication to Wall Street and his calm ability to parry GOP policy proposals without incurring partisan wrath.

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