NEW YORK (CNN/Money) -
The Bush administration has little time to fill the gaps in its economics team created by Paul O'Neill and Larry Lindsey's departures Friday.
Speculation on who will become the next Treasury Secretary or the president's chief economic adviser ran rampant Friday. The administration had already been looking for a successor to Securities and Exchange Chairman Harvey Pitt, who announced his resignation on election night Nov. 5, as well as a chairman of the newly formed accounting oversight board.
Greg Valliere, political economist and chief strategist at Charles Schwab Washington Research Group, said he thought the administration would have two distinct lists of candidates for the two new positions, not one list with names being considered for both.
"I think the Lindsey job may be more of a Ph.D economist type of job," he said. "Treasury is a different list, a big name, someone the Republicans and markets will have confidence in."
Coming up with a name from Wall Street could be difficult, though, due to all the current investigations of conflicts of interests by major brokerage firms' research departments.
Though Valliere wouldn't speculate on names that could make the list, Jeffrey Saut, chief investment strategist of Raymond James, said that Valliere's boss, Charles Schwab, is one of the names being floated for the Treasury Secretary job. Schwab's firm, which does not do investment banking, is one of the few major brokerage firms not tarred by the investigation of analysts by New York Attorney General Eliot Spitzer.
Saut said retiring U.S. Sen. Phil Gramm, who had been slated to become vice chairman of brokerage firm UBS Warburg, is another name being floated for the Treasury secretary position. Former senators sometimes face easier confirmation processes by their former colleagues.
But Gramm could face tough questions because his wife Wendy was a member of the Enron Corp. board of directors and of the audit committee of the energy trader whose accounting problems caused the nation's second largest bankruptcy. Gramm also is one of the few members of congress to oppose the Sarbanes-Oxley corporate reform bill, although he eventually relented and voted for the measure.
One market strategist said that Michael Boskin, former economic advisors to Presidents Reagan and George H.W. Bush, is also being floated as a candidate.
Treasury Undersecretary for International Affairs John Taylor is also a name mentioned to succeed his boss. Another internal candidate, Peter Fisher, Treasury Undersecretary for Domestic Finance, was suggested by Banc of America Securities Chief Economist Mickey Levy.
Fisher, formerly executive vice-president of the Federal Reserve Bank of New York, is a registered Democrat and a fiscal conservative, Levy said. But Fisher could bring strong union opposition. He was one of two members of the Air Transportation Stabilization Board who voted Wednesday to deny United Airlines' request for $1.8 billion in federal loan guarantees. That decision has been attacked by the nation's powerful airline unions because it is likely to force the carrier into bankruptcy.
One of United's unions, the International Association of Machinists even suggested Friday that O'Neill's resignation should force the overturning of the ATSB's 2-1 vote against United.
Valliere said that the new Treasury secretary will likely be someone who is on board with a strong economic stimulus package.
"O'Neill's departure removes an impediment for a big stimulus package," said Valliere. "He had been lobbying against a package, worried about a budget deficit."
As to the top economic position, Valliere said that R. Glenn Hubbard, now chairman of the White House Council of Economic Advisers, is probably at the top of a short list for that position. But he also said that economist Martin Feldstein, who is seen as a mentor for both Hubbard and Lindsey as well as other top economic officials in the administration, could be a candidate.