No Bulls for Bush: With Little Access, Wall Street Views White House Warily

President Bush received a raucous reception on the floor of the Chicago Mercantile Exchange last week. But Wall Street traders have generally not reacted to his economic agenda with exuberance

Bush's agenda includes reducing taxes sharply, lowering capital gains taxes, eliminating the estate tax and establishing private investment accounts for participants in the Social Security system. All of which is bullish for Wall Street. But since his inauguration, the Dow has fallen while the Nasdaq has dropped nearly 30%.

Sure, the slowing economy and disappointing earnings have something to do with it. But investors large and small may find that the current administration -- despite its pro-Wall Street tax posture -- will not attend to the needs and prerogatives of the capital markets as well as its predecessor. Wall Street is thus unlikely to supply Bush with the validation he needs to promote his economic plans.

Bush's economically sensitive appointments have sent a distinctly mixed message to the markets. For Treasury secretary, Bush apparently considered Wall Street elders like Donald Marron of PaineWebber and Walter Shipley of Chase Manhattan, only to tap Paul O'Neill, the CEO of Alcoa.

So far the Rust Belt executive has done little to endear himself to Wall Street. He told the Wall Street Journal that "people who sit in front of a flickering green screen" are not the "sort of people you would want to help you think about complex questions." During his confirmation hearings, he further set traders on edge by criticizing sharply the stability-enhancing bailouts engineered by Robert Rubin. He dubbed the 1998 Russia bailout "crazy."

Bush's other choices for key economic posts were hardly more reassuring. National Economic Council Chairman Larry Lindsey is an economist with no Wall Street experience. The same is true for Glenn Hubbard, a Columbia University economist, who has been named to head the Council of Economic Advisers, and Stanford University economist John Taylor, who has been named Treasury secretary for international affairs.

The closest Wall Street has come to inclusion in the new administration has been the appointment of Peter Fisher, an official at the New York Federal Reserve Bank, as undersecretary of domestic finance. So why has Bush gone out of his way not to include many Wall Streeters in his administration?

One clue lies in the fact that in the 1990s New York and Wall Street became Clinton country. Clinton enlisted Wall Street executives like Robert Rubin to serve in his administrations. From the Blackstone Group, Roger Altman came to serve as deputy Treasury secretary and Jeffrey Garten served as undersecretary of commerce for international trade. Arthur Levitt, the former chairman of the American Stock Exchange, ran the Securities and Exchange Commission. Goldman Sachs bankers were installed at the Export-Import Bank and at key Treasury posts.

This led to many Wall Streeters visiting the White House for the now-infamous series of coffees and hosting fund-raisers for President Clinton, Senate candidate Hillary Rodham Clinton and Vice President Al Gore. In return, the Clinton administration reappointed Federal Reserve Chairman Alan Greenspan, agreed to cut government spending to keep interest rates low and intervened when foreign economic crises reared up.

Bush, by contrast, views New York and Wall Street as alien turf. The former Texas governor last fall ventured into Democratic Gotham about as frequently as Al Gore appeared with President Clinton. More significantly, few Wall Streeters inhabited Bush's Austin, Texas-based policy and fund-raising circles. In early January, Bush convened two economic summits. Not a single CEO of an investment bank or major New York financial institution attended.

The Austin-New York divide isn't simply a matter of personality. Partially in reaction to the Clinton administration's pro-Wall Street tilt, influential segments of the Republican party have grown skeptical of the prerogatives of the capital markets. Many Republican congressmen, for example, opposed Clinton's Mexico bailout. Paul O'Neill said recently that "it will be important to show countries who threaten to fall into difficulties that the rest of the world will not be ready to help them."

Such statements leave Wall Street and the global capital markets wondering about this unfamiliar crowd. In mid-February, when O'Neill seemed to back away from the traditional U.S. strong-dollar policy, it caused a momentary frisson in the currency markets. When Turkey ran into trouble, the U.S. largely sat on the sidelines.

Investors, traders and executives should expect more mixed messages as the new administration tries to find its footing. Without a native-speaking Wall Streeter in Washington, the administration may have difficulty communicating with the markets. And vice versa.