Shuffle at Treasury Will Bring Changes in Style, Some Substance

A SHUFFLE of President Clinton's top economic advisers is likely to lead to subtle but significant shifts in financial policy - and political tenor.

The replacement of Lloyd Bentsen as US Treasury Secretary with Robert Rubin, head of the National Economic Council, will leave the administration without one of its most senior members - and a strong, steady presence on Capitol Hill.

Mr. Bentsen has been the administration's elder statesman, the sober adult in a White House of relative youth and zest. A conservative voice in the Cabinet, the patrician Texan has been a valuable networker in lobbying Capitol Hill - especially the Senate - where he spent most of his career.

In Mr. Rubin, whose takeover was announced Tuesday, the administration won't get the political savvy or deep knowledge of Washington, but it will have someone widely respected on Wall Street.

Though his elevation is seen as more of a seat change than a sea change at Treasury, it will bring shifts. One of the first is likely to be in the management of the US dollar.

In the first two years of the administraton, Bentsen talked the US dollar down compared with the yen. He hoped to make US exports more competitive in Japan. But Japan went into recession, reducing demand for imports from the US.

``In a way, he accomplished the exact opposite,'' recalls Peter D'Antonio, senior economist at Citibank, ``and this year he admitted he made a mistake.''

This is not likely to happen under Mr. Rubin.

``He understands the importance of a firm dollar,'' says Robert Hormats, vice chairman of Goldman Sachs International. He believes Rubin needs to address this issue quickly since there are still some foreign investors who believe the administration wants a weak dollar. This may actually help to lower long-term interest rates since foreign investors have demanded higher interest rates to compensate for the dollar's weakness.

As Treasury chief, Rubin needs to satisfy at least three major constituencies.

He must first work within the beltway - no small task, given Bentsen's imprint. Indeed, in policy councils at the White House, the silver-crowned Texan was often deferred to by younger advisers for sagacity about how Washington worked, even if his advice was not always heeded.

But Rubin, too, has enjoyed a singular presence at the White House. Administration colleagues consider him smart and well-organized. He is also considered to be one of the president's closest advisers. At least until Leon Panetta took over as chief of staff, Rubin was in a small handful of aides who talked most to Clinton.

Rubin will also have to assuage Wall Street. On Tuesday morning the nation's stock and bond markets seemed to be taking the prospect of a change in stride.

``Mr. Rubin will probably do a good job given his background,'' says Veronika White, an economist at First Fidelity Bancorporation in Philadelphia.

Although she does not expect any major changes in economic policy, she believes Rubin will begin to focus tax cuts that could be put together for the middle class. Over the past two weeks, Rubin has been hosting meetings to discuss tax-cut options.

Even though tax cuts will be popular, Wall Street economists are anxious that the federal budget deficit be held in check.

Mr. Hormats says Wall Street will need a strong commitment to continue to reduce the deficit. If the deficit swells, it's likely that investors will respond by unloading long-term bonds. This would cause long-term interest rates to rise.

In fact, some Wall Street economists believe that Rubin will change the way the Treasury finances the US debt. Under Bentsen, there was a shift toward short- term securities.

``This experiment was inprudently timed,'' says William Sullivan, an economist at Dean Witter Reynolds. ``The best way to manage the debt is to balance long term and short term.''

Rubin may also help the administration's relations with the states. Hormats says Rubin has a ``good sense'' of the relationship between the federal and state governments as a result of working on local policy issues when he was on Wall Street. This could be useful to governors trying to mobilize public and private money for infrastructure projects.

The Treasury chief also has to have the respect of other foreign central bankers. Although Rubin has been mainly involved in domestic policy in Washington, he traveled widely when on Wall Street. He knows many of the central bankers from those travels. And, he co-chaired Goldman Sachs (where he made $26 million in one year) during a period of overseas expansion at the firm.