The Bush administration finally is on the verge of assembling a powerhouse economic team, headed by a Wall Street heavyweight able to set the terms for becoming its leader, after some 5-1/2 years in power.
But analysts and Washington insiders on Wednesday questioned what it will able to achieve in the remaining 2-1/2 years of George W. Bush's presidency, even with Goldman Sachs Chairman Henry Hank Paulson at the helm of the Treasury.
Paulson, if confirmed by the Senate as expected to succeed current Treasury Secretary John Snow, would work with a team that includes White House Council of Economic Advisers Chairman Edward Lazear -- new in February -- and a freshly installed Office of Management and Budget Director Rob Portman.
It also includes Tim Adams, an activist under secretary for international affairs already at Treasury and, at the end of August, will have another highly respected Wall Streeter, JPMorgan Vice Chairman John Lipsky, as first deputy managing director at the International Monetary Fund.
It's a very impressive, experienced and powerful team, said economist Mark Zandi of Economist.com in West Chester, Pa. I would feel comfortable that if something does go wrong, that we would have the right people in place, more comfortable about that than just a few months ago.
Hard to gauge is whether the skills most likely needed will be in crisis management or in policy origination.
The odds are certainly rising for financial turbulence starting with trouble in currencies and in the dollar, stemming from mounting global imbalances, not all of which are the United States' fault, said Allen Sinai, chief global economist for Decision Economics Inc. in Boston.
The emerging economic team under Paulson reflects a recognition of that possibility, Sinai suggested.
It is a sign that economic policy, which was principally domestically focused and highly centralized in the White House, will now have a more global dimension and more leadership emanating from outside the White House, he said.
ON HIS CONDITIONS
A day after the announcement of Paulson's nomination, it was increasingly apparent that another former Wall Streeter -- White House Chief of Staff Josh Bolten, who had also worked at Goldman Sachs -- was vital in luring Paulson and that Paulson was allowed to set conditions for taking the job.
A U.S. official who requested anonymity said that Bolten had held ongoing discussions with Paulson. In these discussions, it was made clear that Paulson would have a very large seat at a very small table in regards to advising on economic policy.
White House spokesman Tony Snow, speaking to reporters at the daily briefing, confirmed that it took time to persuade Paulson to move to Treasury, which has not had the profile it did in the prior Clinton administration when then-Treasury Secretary Robert Rubin was seen as a policy lion.
I think it is safe to say that he had some reluctance about doing it and was insistent on a series of conditions, and apparently, his concerns were addressed, Snow said.
Cesar Conda, a former assistant for domestic policy who worked with Vice President Dick Cheney and now is with the Washington lobby firm Navigators LLC, said Paulson's appointment was aimed at restoring the luster to the Treasury.
In every other administration, it's been at the center of economic policy decision making, but in this administration it's taken a back seat, Conda said, a situation that Bolten recognized must be addressed if the administration was to get credit for a growing economy and move forward.
But there are daunting obstacles.
I'm confused about what they hope they can accomplish now, Economy.com's Zandi said. They're hamstrung by the president's political unpopularity, largely stemming from the Iraq war, and the failures of the past few years, including on moving tax reform forward.
One area in which both Zandi and Sinai saw room for potential progress was improving relations with Asian trade giant China, a country that Paulson said he has personally visited more than 70 times as its economic might grew.
He might be able to help accelerate its move toward (currency) flexibility because of his personal ties and because of his international stature, Zandi said.
If global economic conditions turn sour, and a calming influence is needed, Sinai said that, like Rubin -- who also came to Treasury from Goldman Sachs -- it could be anticipated that Paulson already has been tested in the fire and would not flinch easily.
Damage control goes on every day in a global firm like Goldman, Sinai said, And those who survive it become very good crisis managers when that is needed.
(additional reporting by Caren Bohan and Mark Felsenthal)