By announcing that Nicholas F. Brady will stay on as Treasury secretary, President-elect Bush is clearly trying to send a calming message to nervous financial markets.
Basically, it is a message that the new administration has no intention of making waves, that it will give swift attention to big U.S. budget and trade deficits, and that it will strive to preserve the stability of the dollar.Seldom have reassurances been as necessary as has been the case lately. No sooner had George Bush won the election than the stock market dropped 60 points and the dollar started falling. Never before has a Republican presidential victory received that kind of a greeting.
The challenges facing Brady are unmistakably clear. Besides striving to whittle down the federal deficit and stabilize the dollar, he must also see how much more can be done to forgive the international debts of impoverished Third World nations without encouraging financial irresponsibility.
Then the Treasury secretary needs to quickly address the savings and loan crisis. Estimates of the cost of bailing out hundreds of insolvent institutions have skyrocketed to between $50 billion and $100 billion. Though Brady already has named a Treasury task force to examine the problem, what's needed is not more studies but more reforms to avert the risky loans that helped bring on the crisis.
Having been on the job since early August, Brady has a head start even before Bush moves into the Oval Office. During that period, Brady has learned to keep a low public profile, knowing that the wrong word from the secretary of the Treasury can unsettle the stock market and send the dollar into a tailspin.
Even so, Brady is still new on the job and still has much to learn, especially about the nuances of exchange-rate management and Third World debt. Fortunately, he has the respect of insiders on both Wall Street and Capitol Hill - as well as the confidence of the next occupant of the White House.
Let's hope that confidence is well placed. Right now there's a distinct danger that financial markets might push the value of the dollar down too far, raising the specter of higher interest rates and a possible recession. By staying on at Treasury, Brady is shouldering some responsibilities whose importance cannot be exaggerated.