No one wants to be the new Treasury secretary.

Commentary about business and finance.
April 7 2006 6:20 AM

Snow's Job

Why no Wall Street CEO wants to be the new Treasury secretary.

John Snow. Click image to expand.
John Snow

Several Democrats yesterday unveiled the Hamilton Project, an effort to create a new vision for economic policy. Republicans, meanwhile, are trying to engineer their own Hamilton project—an effort to convince a well-known Wall Street figure to join the administration as Treasury secretary.

Ever since Josh Bolten replaced Andrew Card as White House chief of staff, speculation has heated up as to who might replace long-suffering, long-serving, long-ignored Treasury Secretary John Snow. (The 65-year-old Snow's exit from Washington has been rumored longer than Katie Couric's prospective departure from the Today show.) Many Bush loyalists have long blamed Snow for the failure of the administration to receive proper credit for what they view to be a brilliantly performing economy.

Unnamed Republican insiders are said to be hoping that an A-list CEO, preferably from Wall Street, will be willing to take the job. Yesterday's Wall Street Journal tagged Goldman Sachs CEO Henry Paulson as a potential Snow successor. The Financial Times has noted interest in Morgan Stanley's John Mack and here, in Richard Parsons of Time Warner. Stan O'Neal of Merrill Lynch is occasionally mentioned in such conversations.

For those who thought Bolten's appointment would signal more realism in the West Wing, this fanciful list will come as a bitter disappointment. After all, the characteristics of a successful Bush Cabinet secretary and those of successful Wall Street CEOs appear to be mutually exclusive.

The probability of Bush being able to draft any of these guys—virtually all of whom have signaled their disinterest—is incredibly low. Why? For starters, it's a great time to be the CEO of a Wall Street firm. The regulatory and legal nightmares of the 2001-2003 period are history, and so is the bear market. Goldman Sachs, Merrill Lynch, and their peers are making money hand over fist. (Here's a one-year chart of several investment banks, compared with the S&P 500.)

By contrast, Treasury offers only downside. The Bush presidency is hobbling to the finish line. Republicans may lose control of the House or Senate this fall. In the 1980s and 1990s, when Wall Street types like Donald Regan, Nicholas Brady, and Robert Rubin eagerly served, the Treasury secretary had a great deal of policy power. By contrast, the Bush theory of Cabinet government is that secretaries take dictation from the White House. Snow has survived as long as he has largely because of his willingness to stifle any thoughts that stray beyond the confines of White House talking points. Ryan Lizza convincingly argues in the New Republic thata superhuman capacity for enduring humiliation is necessary to survive in Bushworld. As a class, Wall Street CEOs have virtually no capacity for enduring the slightest whiff of anything that could possibly be perceived as disrespect.

Working as a Cabinet secretary in the Bush administration is a great gig for career politicians and bureaucrats who haven't struck it rich. Participate eagerly in the process of crafting, selling, and executing policies—regardless of their merit, efficacy, or honesty—and you can make some money on the flip side as a lobbyist. It worked for John Ashcroft. By definition, however, Wall Street CEOs don't need to worry about their financial future. So, if their work calls upon them do something distasteful, or if they find it annoying to have their speeches scrutinized by low-level White House staffers, they can just retire to one of their many homes. People who have tens of millions of dollars, and who can easily make tens of millions more, are unlikely to exhibit the kind of blind loyalty to questionable fiscal ideas that it takes to be part of this administration's economic team.

Perhaps that's why Wall Streeters haven't made much of an impact on the administration. Stephen Friedman, the former Goldman Sachs partner who ran the firm with Robert Rubin in the early 1990s, lasted a few years as director of the National Economic Council but had no apparent impact on policy.

What's strangest about the Bush fantasy names is that they just aren't in synch with today's Republican party. Paulson is a notorious tree-hugger; he's the chairman of the Nature Conservancy. Richard Parsons is a member of that nearly extinct species, the Rockefeller Republican.

Finally, there's what people on Wall Street call the optics. The dissatisfaction with Snow stems from the fact that he doesn't seem to convince enough Americans that it's raining when they're getting pissed on. Sure, the headline figures on gross domestic product, inflation, and the unemployment rate look fine. But median income hasn't budged in several years, and the tax cuts aren't trickling down. The richest of the rich are getting richer. As David Cay Johnston reported yesterday in the New York Times, "more than 70 percent of the tax savings on investment income went to the top 2 percent, about 2.6 million taxpayers." The Federal Reserve Consumer Finance Survey found that between 2001 and 2004, the top 1 percent increased their share of the country's net worth, from 32.7 percent to 33.4 percent. As people who rely on wage income are subject to the slow-motion wage and benefits cram down, Snow—and the Bush administration—have had nothing to offer except health savings accounts, income inequality, and capital gains tax cuts.

And nobody better exemplifies the trend of sharply rising incomes at the top than the fantasy list. Can CEOs like John Mack (minimum 2005 compensation: $25 million), Henry Paulson (2005 compensation: $38.8 million), or Stanley O'Neal (2005 compensation: $35.5 million) really stand up and suggest, as Snow did to the Wall Street Journal, that making a few people really rich makes us all wealthier?

John Snow will have a replacement, and he may very well come from the corporate world. But if it's an A-list Wall Street CEO, I'll buy a copy of Dow 36,000 and eat the first chapter.

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