Treasury Secretary Robert E. Rubin resigned Wednesday, clouding prospects for financial reform and temporarily roiling world financial markets.
He plans to turn over the job to Deputy Treasury Secretary Lawrence H. Summers on July 4-a move rumored for months. Stepping into the deputy slot will be Stuart Eizenstat, currently an under secretary at the State Department.
The announcements initially caused stock prices to plummet 200 points, but by midday the Dow Jones industrial average had recovered. The dollar weakened against the yen and the euro in the morning but rebounded in late trading.
In Mr. Rubin, the Clinton administration had a powerful advocate for broad powers for direct bank subsidiaries and a strong defender of the Community Reinvestment Act.
"The White House will not replicate the presence he has had" in the debate over the financial reform bill, said Annie Hall, government relations director at Bank One Corp. "He's an excellent spokesman. He has tremendous credibility. It is understood that he can get to the President whenever and wherever and on whatever he would like."
"His leaving office would mean the administration's most effective advocate for financial reform will be missing," said Richard M. Whiting, acting executive director of the Financial Services Roundtable. "For the banking industry, this will be a big loss."
Yet lobbyists predicted that the Treasury's position on the legislation will not waver under Mr. Summers and that the White House's negotiating power remains strong because of President Clinton's personal involvement in the debate.
"I just don't think it is a big deal," said L. Thomas Block, senior vice president of government affairs for Chase Manhattan Bank. "The President is still there. ... President Clinton vetoes bills, not Alan Greenspan or Bob Rubin."
Other observers agreed. "I don't see any implications on reform with the change," said Comptroller of the Currency John D. Hawke Jr. "Larry will be as strong on reform as Bob was. These are not personal positions. These are the institution's positions."
Some sources were worried about Mr. Summers' lack of experience on banking issues. "Summers has played no domestic role at all," said Kenneth A. Guenther, executive vice president of the Independent Community Bankers Association. "He has been Mr. International. He does not have the same credibility as Mr. Rubin."
Capitol Hill officials were confident that financial reform could still be enacted this year. "Mr. Summers has been very cooperative and easy to work with," said Rep. Marge Roukema, chairwoman of House Banking's financial institutions subcommittee. "I'm sure we can come to terms with him on financial modernization."
A Senate Banking Committee official said Mr. Rubin's resignation will not hurt the bill because Congress expects to complete work on financial reform before he leaves in early July.
The administration's unexpected nomination of Mr. Eizenstat drew particular praise.
"He has a lot of experience with these financial reform issues and is a very savvy player," said Bert Ely, president of the industry consulting firm Ely & Co. "He will be a big complement to Summers. He is going to be the one who carries the ball on legislative issues. He is a political operative and a very good one."
Mr. Eizenstat was a top economic policy aide to former President Carter and is widely credited with shepherding interest rate deregulation legislation through Congress. He briefly represented a precursor to the Financial Services Roundtable on Glass-Steagall reform.
"Stu Eizenstat is not only a first-rate lawyer but has his own experiences in this area," Mr. Hawke said. "He will be a strong representative at Treasury."
Senate Finance Committee Chairman William V. Roth promised to hold confirmation hearings promptly for Mr. Summers and Mr. Eizenstat. The Delaware Republican did not indicate opposition to either candidate.
At a Rose Garden ceremony, President Clinton heaped praise on Mr. Rubin.
"Bob has been acclaimed as the best Treasury Secretary since Alexander Hamilton. I think that acclaim is deserved," the President said. "I will miss his cool head and steady mind."
"It's very hard to leave," Mr. Rubin said. "This almost six and a half years has been all-consuming. I think it is time to go home to New York."
Mr. Rubin joined the administration as Mr. Clinton's top economics adviser in January 1993 after 26 years at Goldman, Sachs & Co. He was sworn in as Treasury Secretary in January 1995.
David H. Komansky, chairman of Merrill Lynch & Co., credited Mr. Rubin for the country's strong financial health. "Secretary Rubin brought steady and firm leadership to the U.S. economy and the global financial markets, inspiring confidence around the world," he said. "As the new secretary, Larry Summers will bring great experience, skill, and continuity to this critical role."
Senate Banking Committee Chairman Phil Gramm lauded Mr. Rubin's willingness to step back from a lucrative career as an investment banker to serve in public office. "Of all the officials in the Clinton administration, he has had more credibility with me and I think with Congress than any other," the Texas Republican said.