Trying times for Bush's economic point man

A black Cadillac pulls up, a Secret Service agent pops open the rear door, and Treasury Secretary Paul F. O'Neill strides into a hotel near the White House.

The tanned, silver-haired O'Neill is here to have breakfast with a group of reporters, the start of a day spent selling President Bush's plan for dealing with corporate crime.

As soon as the former Alcoa Inc. CEO sheds his suit coat and starts talking, his keen intelligence, palpable sense of rectitude, and detailed knowledge of the corporate world are immediately evident.

Still, the 72nd Treasury secretary is an unlikely salesman. He is openly impatient with poorly prepared reporters, disdainful of Washington's sense of self-importance and partisanship, independent enough to offer implied criticism of the president, and not shy about displaying his command of all things economic and corporate.

"I do know facts. I am really good about facts," O'Neill snaps early in the breakfast.

Last week's facts were not encouraging for the Bush economic team. President Bush's speech on Wall Street failed to calm nervous investors and the Dow Jones Industrial Average closed down at 7.4 percent for the week. The University of Michigan reported consumer confidence in July had fallen to its lowest level since Sept. 11. And the Bush administration announced it expected a $165 billion federal budget deficit this year, after four years of surpluses.

Meanwhile, members of both parties in Congress scrambled to adopt reform measures tougher than the president proposed in his speech. Late in the week, House Speaker Dennis Hastert said he supported a plan drafted by Senate democrats.

It is all enough to make critics question the Bush economic team's competence.

"We've got burgeoning deficits, a sagging dollar, and a general atmosphere of corporate scandal. I don't think you'd say his team has been doing too well," says Marshall Wittman, senior fellow at the conservative Hudson Institute.

When a reporter shares that quote with him, O'Neill responds, "As long as they were at it, they should have said the economic team is responsible for the planes crashing into the towers. It happened on their watch."

O'Neill's view of the CEO's world is deeply moral, and he seems genuinely outraged by the conduct in corporate boardrooms. In his former life as chairman and CEO of Alcoa, the world's largest aluminum producer, O'Neill says he thought about the $23 billion concern the same way the owner of a local hardware store would feel about his business.

"It was what my life was about. I felt that I owned the responsibility for the lives that were employed there – their physical well -being and their economic improvement," he says.

That sounds like a typical speech at a Chamber of Commerce rubber-chicken dinner. Except O'Neill has a record to back up his rhetoric. He used a relentless focus on worker safety to remake the culture at a lagging Alcoa. He cut injuries to one-tenth the level typical in manufacturing. Profits soared and O'Neill became rich. In his last year at Alcoa, he made $25 million.

"You know all the reforms that are being considered now? I did all those things 13 years ago at Alcoa," he says. "Not because the government told me to do it, but because it was the right stuff to do."

Now O'Neill finds himself helping the Bush administration map its strategy for dealing with CEOs who, when left to own devices, did not do the right thing.

He had a key role, along with several White House staff members, in drafting Bush's corporate reform plan. The secretary also briefed reporters on Air Force One as Bush flew to New York last week. But he was not visible to those who watched the event on TV.

Critics question how influential O'Neill's policy role is as compared with that of Bush political adviser Karl Rove. "I have a belief that there is a great deal more role for Karl Rove than for the substantive types," says William Niskanen, who served on the Council of Economic Advisors during President Reagan's administration.

Mr. Niskanen also notes O'Neill's tendency to travel while crises are brewing at home, "traipsing off to Africa with [rock star] Bono instead of taking on" the corporate governance issue. On Thursday, O'Neill departed on a week-long tour of Ukraine, the Kyrgyz Republic, Uzbekistan, and Georgia. So on Friday, O'Neill was missing when the president's corporate crime task force held its first meeting at the White House.

"It is odd in the midst of a crisis that he has engaged in so much foreign travel," says Mr. Wittman. "Exactly who is in charge of economic policy at a time the economy is on the precipice of crisis?"

But O'Neill finds travel a valuable link with the real world of hard data and hard-working people.

"The notion that Washington is the center of the universe and creates value, and everything happens because of what goes on here, is not true," he says "If you want to find out where real jobs are created, you ought to go with me on some of my trips."

O'Neill is a study in contrasts with his boss, President Bush. O'Neill grew up poor in a house without indoor plumbing, attended Fresno State in California, and started his government career as an intern in Washington. Bush had all the advantages that came from being the son of a president and the grandson of a senator.

Yet, the Treasury Secretary says he and the president first connected out of a shared sense of the importance of education.

"I saw in private meetings his passion for the issue of [how] every child can succeed and it is up to us to help them succeed. I believed him."

While he did not know Bush well before the election, O'Neill has been friends with Vice President Dick Cheney since they worked together in Washington in 1969.

That long-term tie and freedom from financial worries may help explain the Treasury secretary's penchant for speaking freely – even when the result could be read as implied criticism of the president.

When first asked about Mr. Bush's tardiness in filing a Securities and Exchange Commission form in 1990, O'Neill responds that while "it is not acceptable" to file late, "you will also find that even in some very good companies there are occasional lapses."

But when pressed, O'Neill becomes more blunt. The president "has talked about this. I don't know his case. Ask me about mine. Did I ever do an untimely filing of a form 4. No."

O'Neill is clearly impatient with the partisanship which sometimes characterizes the city. "One of the things I really struggle with is that there is so little fascination and work on facts and how the whole conversation wants to be about a tennis match over hitting things back and forth across the net as though America's future was some kind of bi-polar Republican or Democrat thing."

Whatever role O'Neill ends up playing in hammering out a final corporate reform package, it clearly will be based on his bedrock belief in the importance of character in shaping corporations.

O'Neill clearly feels passionately about the need for CEO's to show moral leadership. The CEO position, "is the determinant of how well or unwell our system of capitalism works," he says. "There is no set of government watchdogs or regulatory processes than can overcome or compensate for the lack of an articulated value structure from the top."