Wall Street Anxious About Clinton
WASHINGTON (AP) _ If recessions in one-third of the world’s economies and the crumbling Russian ruble weren’t enough, a worried Wall Street now is also anxious about President Clinton’s future.
Investors are counting on two men to keep the U.S. economy humming _ and Treasury Secretary Robert Rubin, like Alan Greenspan before him, is signaling he’ll be there.
Rubin showed up on the White House lawn after an emotional Cabinet meeting with the president Thursday night, assuring the world via television that Clinton’s troubles wouldn’t divert his attention from the financial firestorm raging out of Asia.
``We have been totally focused″ on the economic crisis, Rubin said.
The underlying message: Rubin, the savvy Wall Street veteran and architect of much of Clinton’s economic success, has his eye on the ball and, most importantly, isn’t going anywhere, despite widespread rumors that he would soon leave the Cabinet.
Last week Greenspan, the Federal Reserve chairman, signaled that the central bank stood ready to lower interest rates to keep the U.S. economy out of recession.
Those words were enough to power Wall Street to its biggest one-day point gain in history Tuesday, a rise of 380 points for the Dow Jones industrial index. But the market’s extreme nervousness was underscored by the following two trading sessions, when the Dow slumped by 400 points. That drop was triggered by the announcement that Independent Counsel Kenneth Starr’s report _ outlining possibly impeachable offenses by Clinton _ was being released.
The potential government crisis is affecting the markets ``because a beleaguered presidency could mean the inability to deal with risky world situations ranging from terrorism to economic turmoil,″ said Allen Sinai, chief economist at Primark Decision Economics.
After those two down days, Wall Street rallied Friday, in part bolstered by Rubin’s appearance and by rising hopes that Greenspan will follow up last week’s hint with an actual cut in interest rates, possibly as early as the Fed’s session Sept. 29.
The Dow was up 179.96 points for the day to close at 7,795.5. That leaves it still down 1,542 points, or 16.5 percent, from its July 17 record.
To underscore that the administration and the Fed are keeping in close touch, both Rubin and Greenspan will testify on the international economic troubles next Wednesday on Capitol Hill.
Rubin’s appearance Thursday was in marked contrast to his low profile after Clinton’s Jan. 23 Cabinet session, right after the Lewinsky scandal broke. At that time, Rubin was not among a group of four Cabinet members who met with reporters and said they believed the president was innocent of wrongdoing.
So high is his standing with Wall Street that his mere absence that day sparked a stock price plunge as rumors spread that he was on the verge of resigning.
The rumors were quickly denied. But they have popped up again throughout this year on speculation that Rubin was growing tired of his Treasury post and would depart by year’s end. Rubin’s coy denials in the spring fueled speculation further.
But since the Asian crisis deepened this summer, Rubin’s resolve to stay seems to have strengthened. Now, with his president in trouble, analysts say they believe there’s no chance he will leave soon.
``The markets look to Robert Rubin and Alan Greenspan to keep bad things from happening,″ said Lyle Gramley, a former Federal Reserve board governor. ``The departure of either one would be a big blow.″
Hopes for Fed action gained strength with Friday’s report that inflation is still a no-show in the United States. Brazil’s worsening situation, where the government is trying hard not to devalue its currency, also is likely to affect Greenspan’s thinking.
Latin American officials ``believe a Fed rate cut would demonstrate that someone was doing something to help calm global financial jitters,″ said Sung Won Sohn, chief economist for Norwest Corp.
Rubin issued a statement late Friday declaring that the ``financial stability and prosperity of Brazil is of vital importance to the United States.″ He said he had telephoned Brazilian President Fernando Henrique Cardoso to ``express U.S. support for Brazil’s actions thus far to respond″ to the currency pressures.
While Rubin’s departure has been put on hold for now, many doubt he will remain for Clinton’s full term.
The hot in-house candidate to replace him is Deputy Treasury Secretary Lawrence Summers. James A. Johnson, former head of mortgage giant Fannie Mae, has also been mentioned.