Snow's Ordeal Ends as Bush Chooses a Successor (Update6)

By Kevin Carmichael and Richard Keil

May 30 (Bloomberg) -- John Snow's 18-month battle with rumor and innuendo is over.

The U.S. Treasury secretary, whose future has been the subject of speculation since President George W. Bush won re- election in 2004, submitted his resignation, telling the president he has been ``anxious for some time to return to private life.'' Bush nominated Henry Paulson, chief executive officer of Goldman Sachs Group Inc., to succeed Snow.

Snow, 66, who replaced Paul O'Neill in February 2003, has been a loyal soldier for the administration, traveling the country to promote Bush's efforts to cut taxes and convince the public the economy was doing well. That wasn't enough to win a place in the president's inner circle, and Treasury's influence diminished.

``Fairly or unfairly, the most important thing to the financial community, broadly defined, is that the secretary of the Treasury be the president's closest confidante on economic policy,'' said former Minnesota Congressman Vin Weber, now a lobbyist with close ties to Bush. ``That wasn't true of either Paul O'Neill or John Snow, so they're not taken seriously as spokesmen on economic policy.''

Bush said he appreciated Snow's service, saying he showed ``strong leadership'' in carrying out his responsibilities as the administration's chief spokesman on the economy.

A new Treasury secretary won't necessarily mean a new direction in economic strategy. Snow was more a promoter of policy set in the White House than an agenda-setter.

Railroad Executive

Snow didn't have a deep relationship with the president when he joined the administration. He had been chief executive officer of CSX Corp., the nation's third-largest railroad, and backed Arizona Senator John McCain in the Republican primaries in 2000. Snow didn't meet Bush until after he became president.

That fed a perception in Washington that Snow wasn't a valued member of the administration. The New York Times, the Washington Post and the Wall Street Journal all reported in December 2004 that Bush wanted to fire his Treasury secretary, rumors the White House waited 10 days to squelch.

Renewed speculation that Snow would leave flared a year later, and again in April when Joshua Bolten took over from Andrew Card as White House chief of staff.

Snow, in an interview in his office today, said was ready to leave public life at the end of last year and stayed to give Bush time to find a replacement. In recent weeks, he said, he urged the White House to find a successor by July.

``They knew that that was the outer limits that worked for me and the family,'' said Snow, a native of Ohio who holds a doctorate in economics from the University of Virginia. ``I urged them to find the right guy, expeditiously.''

Little Credit

Trent Lott, a Republican senator from Mississippi, said Snow told him ``a couple of months'' ago that he was ready to leave office when they met during an event at the University of Mississippi.

``He has not gotten credit for the great things that he has done,'' Lott said in an interview in Washington on May 25. ``The economy has been great.''

The economy, which grew at an annual rate of 5.3 percent in the first quarter, is one of the few bright spots for Bush, whose job approval sank to a record low of 33 percent in an ABC News/Washington Post poll published May 16.

Karl Rove, Bush's top political adviser, has blamed the ratings on the Iraq war and is framing a strategy to trumpet the economy in the lead-up to November's congressional elections.

Snow helped the president win legislative support for a third round of tax cuts in May 2003, and then succeeded in convincing Congress to extend those lower rates on investments this month.

Point Man

``John was the point man on this,'' Stephen Friedman, senior adviser to Greenwich, Connecticut-based Stone Point Capital LLC and former director of Bush's National Economic Council, said in an interview on May 26. ``John was the most prominent person after the president in developing support for the program.''

Under Snow and O'Neill, the average yield on Treasury notes, which helps set corporate and consumer borrowing rates, has been about 4 percent, the lowest since the 1960s. Under Snow, the 10-year note has averaged about 4.6 percent, compared with 4.8 percent for O'Neill and 6.3 percent for Robert Rubin, the longest-serving of President Bill Clinton's Treasury secretaries.

Snow toured the nation in 2004 as an election-year cheerleader for Bush's economic record. He hit the road again last year with less success, trying to rally support for Bush's failed proposal to privatize part of the Social Security system by allowing individuals to place some of those retirement funds in bond and stock accounts.

Dealing With China

Snow scored a victory in July, when China revalued its currency, the yuan, and promised to allow it to move more in line with market forces. While the Chinese currency has gained only a little more than 1 percent since, China's shift was historic, said John Taylor, an economics professor at Stanford University and Snow's former undersecretary for international affairs.

``He has shown important leadership on this issue,'' Taylor said in an interview on May 16. ``The secretary held off protectionism, and the yuan is moving. Ultimately, we will get flexibility.''

The outgoing Treasury chief refrained from naming China a currency manipulator this month in its semi-annual report on the policies of trading partners. Treasury hasn't cited China in more than a decade, and its failure to do so this time prompted criticism from lawmakers.

Squelching Protectionism

Snow, in the interview, said the most serious task facing his successor will be keeping lawmakers from erecting barriers to trade with China and other nations.

``The biggest challenge is keeping protectionist forces at bay, pressing against the isolationist, protectionist pressures that you see in the Congress today,'' Snow said. ``Those are absolutely real threats and they have to be guarded against.''

Snow continued to espouse the ``strong dollar'' policy developed under Rubin. Snow coupled it with the nuance that currency values are best set in the market, leading some investors to doubt the Bush administration's commitment to the policy.

``He did a fabulous job redefining the strong dollar policy,'' said Stephen Jen, head of global currency strategy at Morgan Stanley in London. ``Snow took away the directional bias by saying the administration would push for policies that would create the conditions for a strong dollar.''

The dollar weakened against the euro and yen for three years through 2004. After rallying in 2005, the currency has resumed its decline, losing 8.1 percent versus the euro and 5 percent against the yen.

To contact the reporters on this story: Kevin Carmichael in Washington at kcarmichael@bloomberg.net ; Alison Fitzgerald in Washington at afitzgerald2@bloomberg.net ;

Last Updated: May 30, 2006 18:37 EDT

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