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Nick Brady Slowly Wins Skeptics Over

April 16, 1989|ART PINE and TOM REDBURN | Times Staff Writers

"They may be laying the foundation for a Chinese water torture," said Jerry Jordan, a former Reagan Administration economist now at First Interstate Bank in Los Angeles. "There's a real danger the plan could unravel."

The Third World debt plan faces similar challenges. While Treasury's new approach has been accepted in principle by finance ministers around the world, both U.S. allies and the independent Federal Reserve Board are unhappy with key elements. Moreover, the plan left so many details unresolved, perhaps because it was rushed out in response to riots in Venezuela, that even top officials cannot say how it will work in practice.

Barry P. Bosworth, a Brookings Institution economist, says the S&L and debt plans have much in common: "They both ended up getting fairly good marks for general direction but are being criticized as incomplete. In both cases, the Treasury had the right basic elements, but the follow-through is lacking."

Senior Brady aides insist that they are learning quickly from their early stumbles. They believe Brady's image problem stems from his low-key, decidedly un-Washington manner. Imbued with an upper-class inner confidence, the usually unflappable Brady is casual and chatty with visitors, seemingly unmindful of the need to weigh his words carefully and almost devoid of ego.

"He doesn't have to go out and impress everybody how important he is," one Treasury official said. "And he's not a guy who took the job as a stepping stone to anything else."

Although Brady lieutenants are careful not to confirm it, acquaintances say he suffers from a mild form of dyslexia, a reading disorder, that forces him to rely on briefings rather than on reading and sometimes makes him seem disoriented. At this past month's meeting of the world's finance ministers, he launched part way into a speech before realizing he had the wrong text.

Brady is used to being more a private man than a public figure. At Dillon, Read & Co., the investment house he headed, his job more often found him taking clients to the golf course for quiet lobbying rather than turning himself into a highly visible figure on Wall Street.

Third World Plan Key

Yet Bush clearly values his judgment, even when it runs counter to the President's own. For instance, Brady was one of the first to warn Bush that former Sen. John Tower's flaws would prove fatal to his bid to become defense secretary. As a result, even though Treasury had its plate full during the transition from the Reagan Administration to the Bush Administration, Brady spent much of December huddled with Bush, counseling him on the Tower nomination.

For all Bush's trust in him, however, Brady's ultimate reputation will probably ride on how well he executes the Administration's hastily crafted Third World debt plan.

In brief, Brady's new approach calls for debtor countries to negotiate with commercial banks to persuade them to discount a portion of their Third World loans and exchange them for new government securities whose interest payments would be guaranteed with monies from the International Monetary Fund or World Bank.

The proposal was initially supposed to work without new lending from banks. But critics argued that debt reduction schemes alone would never provide enough relief. Now, after four or five quickly concocted mutations, Brady has had to reverse himself on the issue, and the Treasury is scrambling to come up with a "test case" country, such as Mexico.

What's worse, some officials have complained that Brady has been high-handed in dealing with the new government of Mexican President Carlos Salinas de Gortari. Earlier this year, top Treasury policy-makers effectively stalled a U.S.-promised bridge loan in a dispute about whether Mexico had met its economic targets. And two weeks ago, Brady abruptly rejected a recent Mexican debt-reduction plan out of hand.

Brady has also drawn criticism for a brief, ill-timed spat with the Federal Reserve Board earlier this year, when he openly criticized Fed Chairman Alan Greenspan for pushing interest rates up as an anti-inflation measure. That outburst led financial markets to think that the Treasury secretary was "soft" on inflation.

Nevertheless, the soft-spoken Wall Streeter quickly backed off when the inflation numbers took a sharp turn for the worse. Aides say Brady and Greenspan meet weekly over breakfast and now have a workable--if not entirely sympathetic--relationship. "There are no differences," Brady insisted.

Without doubt, the reluctant Treasury secretary is becoming visibly less so. Shedding his inhibitions late last month, Brady ventured to the hustings for a two-day trip to Dallas and Houston to promote his S&L rescue plan--and appeared to enjoy the give-and-take with audiences.

But his new-found confidence will do him little good if he cannot deliver.

Said fellow Wall Streeter Alan Stoga, the top economic analyst at Kissinger Associates: "If in six months from now we have a debt strategy that is inadequate, if our trade policy is being driven by events rather than by a larger strategy, and if the Administration hasn't come to grips with the U.S.'s own debt problem, then I think we may have to start worrying."

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