Dow flinches as Rubin resigns from US Treasury head
The smoothness of the succession and the fact that it had long been expected, calmed the initial shock on financial markets. The Dow Jones Industrial Average first dropped 200 points, then recovered swiftly to stand about 50 points down at midday.
Mr Rubin, 60, has been Treasury Secretary for four years, after a 26- year career as a successful investment banker at Goldman Sachs. He first came to Washington in 1993 as a White House official, but never settled in the city. He has maintained a hotel suite and spent most weekends in his New York home. Mr Rubin, who will leave on 4 July, will initially return to private life as an exceptionally wealthy banker.
His knowledge of and instinctive feel for financial markets, combined with his good working relationship with Alan Greenspan, the Federal Reserve Chairman, has helped keep the US economy gliding into its impressive ninth year of expansion.
"Secretary Rubin will be leaving after playing an extraordinarily central role in this administration as far as our outstanding record of fiscal discipline and turning the economy around," said presidential spokesman Joe Lockhart.
There have also been reports that Mr Rubin could succeed Mr Greenspan, whose third term as Fed chairman ends next year, when he will be 74.
The phenomenal performance of the American economy has only been seriously menaced by financial crisis abroad, and it is in this area that Mr Summers has made his mark. Now aged just 44, he was Under-Secretary for International Affairs from 1993 to 1995, when he became Deputy to Mr Rubin. He has been prominent in efforts to handle the crises in Asia, Latin America and Russia.
The youngest tenured professor in Harvard's history, and nephew of two Nobel prize winners in economics, Mr Summers does not trouble to disguise his brilliance. In addition, as a former chief economist at the World Bank, he has a detailed knowledge of international economics. He is seen in the financial markets as a heavyweight successor to Mr Rubin, one who will continue his free-market, strong-dollar policies. His appointment will have to be confirmed by the Senate and could yet prove politically controversial.
Mr Summers' replacement will be Stuart Eizenstat, one of the most experienced officials in Washington and another well-known face on the international economic scene. He is currently Under-Secretary at the State Department for Economic Affairs and had previously worked at the Commerce Department, as Ambassador to the European Union and for President Jimmy Carter.
The magnitude of the global challenge still facing Mr Summers and Mr Eizenstat was demonstrated by events in Russia yesterday. President Boris Yeltsin's decision to sack his government, led by Prime Minister Yevgeny Primakov, sent the rouble, share prices and Russian bonds tumbling.
The World Bank and International Monetary Fund will suspend loans recently arranged to help finance Russia's interest payments due this year. The Russian economy is in such desperate shape that the population is relying on US and European food aid.
Fitch IBCA, the ratings agency, said there was an increased risk Russia would default on its $16bn of Eurobonds outstanding because of the delays in receiving the new loans. Last year's default affected only Soviet-era debts.
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