NEW YORK (CNN/Money) -
John Snow's recent lackluster defense of the dollar is simply part of a long tradition of buck abuse by treasury secretaries who don't come from Wall Street, according to data compiled by a currency trader.
In little more than three months at Treasury, Snow -- formerly CEO of the Jacksonville, Fla.-based rail company CSX Corp. (CSX: Research, Estimates) -- has presided over a steep decline in the greenback's purchasing power, especially when compared with the euro.
While many different factors have driven the dollar down, Snow has done little or nothing to stop the slide. He has made repeated comments that left little doubt he and the Bush administration don't mind the chance to reap some of the economic benefits of a weaker currency, including stronger exports.
But Snow has had plenty of help in fueling the dollar's 17.6 percent decline in the past year. His predecessor, Paul O'Neill, formerly CEO of Pittsburgh-based aluminum maker Alcoa Inc. (AA: Research, Estimates), did plenty of dollar denigration during his rocky two-year stint at Treasury.
According to a recent study by Ashraf Laidi, chief currency analyst at MG Financial Group, a New York-based foreign exchange firm, the behavior of the dollar under Snow and O'Neill shouldn't come as much of a surprise.
Dating back to the Nixon administration, treasury secretaries who have come from anywhere other than Wall Street have presided over flat or falling dollars.
| 
| |
|
|
|
|
|
 CNNfn's Allan Chernoff takes a look at what a weaker dollar means for businesses and consumers.
|
|
Play video
(QuickTime, Real or Windows Media)
|
|
|
|
|
|
The three secretaries who came from big financial firms -- William Simon (Salomon Bros.), Donald Regan (Merrill Lynch) and Robert Rubin (Goldman Sachs) presided over the three biggest dollar gains in the past 30 years.
One of the biggest dollar drops, on the other hand, occurred on the watch of Michael Blumenthal. He came to Treasury in the Carter administration from a manufacturer, Bendix Corp., that eventually became part of conglomerate Honeywell International (HON: Research, Estimates).
"Past history indicates a relationship between the background of the U.S. treasury secretary and the direction of the U.S. dollar," Laidi said.
Laidi noted that several different factors have led to the dollar's ups and downs in the past 30 years, including recessions, wars, terrorism and corporate scandals.
But part of the dollar's recent decline, Laidi said, is due to the vocal complaints of the manufacturing sector, which has suffered for years from a strong dollar -- and has the sympathies of industrialist CEOs such as O'Neill and Snow.
Exporters have a harder time selling their goods in overseas markets when the dollar is strong, and the recent decline in the dollar has helped boost the profits of many exporters, while giving some pricing power to domestic firms.
| Related stories
|
|
|
|
|
|
In testimony Tuesday before a Senate appropriations committee, Snow hinted at the importance he placed on corporate profitability as an engine of labor market relief and economic growth, saying "as [companies] get higher profitability, I think we'll see expansion beginning."
Wall Street firms, on the other hand, benefit from a stronger dollar because it encourages activity in U.S. stock and bond markets -- treasury secretaries from Wall Street likely did not want to risk the kind of drop in stocks and bonds that followed Snow's comments this weekend.
"The Wall Street types want to make the United States attractive for investment, and a strong currency attracts investors," said Greg Valliere, political economist at Schwab Washington Research.
"Wall Street types were also very mindful of market psychology and were all really consistent in their message," he added. "Rubin is the gold standard -- he was very consistent, very concerned about confusing the markets, whereas with [secretaries such as] Snow, you have the threat that the markets could get confused."
|
