The White House intentionally waited until after financial markets closed Friday afternoon before announcing the resignation of James Baker as Treasury secretary and the selection of Wall Street investor Nicholas Brady as his successor.
The timing of the announcement reflects the fact that the markets, which always shudder at the slightest hint of change in economic policy, have been nervous lately about the huge U.S. trade deficit and the way inflation is starting to creep up again.Though the change at Treasury is taking place when the world financial situation is delicate, it really shouldn't cause anyone to lose much, if any, sleep. The departure of Baker, to become George Bush's campaign manager, has long been anticipated. Brady is well-qualified to replace Baker at the Treasury. What's more, the two are so close personally and philosophically that the transition should be smooth enough to reassure investors and world finance ministers.
Since Brady served briefly in the Senate and received high marks from Congress for his performance as chairman of the blue-ribbon commission that studied last October's stock market plunge, his nomination should be quickly confirmed.
A close friend of Bush, Brady could remain at the top Treasury post if Bush is elected president. In any event, Brady can be expected to continue on the same course Baker set.
On Baker's watch at Treasury, the federal debt hit historic heights, America became a major debtor, the stock market collapsed, and the Third World get deeper into debt. But it's hard to blame him for those woes. For example, President Reagan's persistent resistance to tax hikes certainly restricted Baker's options on dealing with the federal deficit.
To his credit, Baker shepherded tax reform through Congress, negotiated spending cuts with the nation's lawmakers, and salvaged the new U.S.-Canadian free-trade agreement in last-minute bargaining.
As Baker prepares to step down, the national economy is growing robustly, unemployment is at a 14-year low, and inflation remains modest. When Brady takes over, his challenge will be to keep the economy on track.