Dubya Homers With Choice of Paul O'Neill for Treasury

The headline said it all: "Outsider O'Neill Has Wall St. Wary." That's right out of Thursday morning's New York Daily News about the appointment of Paul O'Neill as Treasury Secretary. I heard it around the trading desks, too. "Who is this guy, O'Neill?" the kind ones said. What's Bush doing naming the Yankees' excellent right fielder to the Cabinet, said the more sarcastic of the crowd.

To which I say: STOP WORRYING! This guy's the real deal. He's one of the good guys, one of the best industrial managers around with super financial and people skills and we should be thrilled that he is even interested in taking the job. He'll be terrific.

What are my credentials that I can praise this guy so easily? First, I am no suck-up. As an outspoken supporter and friend of Al Gore, I probably could have been expected to knock this guy. No way.

The problems I see in the U.S. economy are the problems of Chrysler(DCX Quote), Xerox(XRX Quote), AT&T(T Quote) and Lucent(LU Quote) and other Old Economy companies that are in danger of failing. O'Neill understands the problems better than any Wall Streeter because he's a survivor of several of the toughest downturns in recent memory.

We don't have a budget deficit any more and we don't have a problem with issuing debt willy-nilly, when a Wall Streeter's skills would have been more relevant. We have a problem in corporate America. O'Neill can help.

Second, he has been a superb manager. He is the only manager in the metal-bending business that has grown his company during this period of massive retrenchment. He has rationalized his plants, closed inefficient production centers and bought his biggest competitor. He has done a magnificent job managing the business when most iron, steel, copper and aluminum companies have just been slaughtered. He also has about the shrewdest group of financial people in a major industrial company.

Alcoa(AA Quote) is not the first company to report each quarter in the Dow because it is easy to throw numbers together from a worldwide aluminum business. Alcoa reports first because it has the best controls. The company has not had a severe shortfall (the preannouncement a few months ago was not awful), and until this slowdown, usually exceeded numbers.

Oh, and while we are at it, his record on employee safety is one of the best in the country. (You may not think that matters, but aluminum smelting is a dangerous business.)

I think Rubin and Summers both worked great at Treasury. When they came in, the dollar was in free fall; serious intellectuals thought that the U.S. bond market was in danger of defaulting; and everyone on Wall Street would beat up the Treasury at every bond auction. They left with a balanced budget and the best bond market of the last 40 years. We don't do many auctions now; we do a lot of buybacks.

Some of that deficit reduction came because Clinton was at loggerheads with the Republicans in Congress. The Republicans kept Clinton from spending as much as he probably would have. But most of it was great financial management by two savvy Wall Streeters, one after the other. I think the tradition continues with O'Neill, and now we have the added benefit of someone who has dealt with America's shrinking manufacturing base in a successful and prudent way.

Great choice, W.