Profile: Lawrence Lindsey
W A S H I N G T O N, Jan. 3, 2001 -- Larry Lindsey comes to the new Bushadministration straight from the old Bush administration, having fought battles with recession — andwith economists who took umbrage at his defense of RonaldReagan’s tax cuts.
Lindsey, appointed today as President-elect GeorgeW. Bush's top White House economic adviser, is a former FederalReserve governor who, somewhat out of character for a centralbanker, is outspoken about his views.
He gained much fame, though with his public fight against Toys R Us.
Really, his feud was with credit-rating practices. But Lindseymade the children’s goods retailing chain and the Bank of New Yorkthe faces of that fight in 1995 when the bank’s computers rejectedhis application for a Toys R Us credit card. He was a member of theFederal Reserve Board at the time.
The reason for the rejection: too many credit inquiries when herefinanced his mortgage, despite a $123,000 salary andsqueaky-clean bill-paying record.
Toy Chain Suffers Embarrassment
Lindsey declared the rejection funny. Less humorous, he said,was that computers, for all their objectivity, could turn down alow-income person with no credit history who might try to obtain abusiness loan.
Victory came in the form of a $15,000 credit line later offeredby the toy chain and the bank — Lindsey turned it down — and awidely accepted policy change that some in the credit-scoringbusiness call the “Larry Rule”: Computer results of creditscoring for prospective cardholders, particularly rejections, arenow widely reviewed by human beings before being verified.
Such populist policy-challenging has earned Lindsey, 46, kudosfrom consumer groups. But Bush’s new assistant foreconomic affairs has made a more controversial mark in politicaland academic circles.
He opposes cutting the capital gains tax rate, something of anoddity among conservatives.
In line with his Toys R Us credit-scoring battle, the son ofpublic school teachers in Peekskill, N.Y., was noted during hisfive-year stint on the Federal Reserve Board for lecturing banks onimproving lending practices to poor people.
As for financial forecasting and the Bush campaign’s faith inthe safety of the stock market, critics point to Lindsey’sacknowledgment in May that he pulled his own money the stock marketbecause it was too risky.
“I hate losing money,” he said then.
Pessimism in the Office?
Some have called him abrasive and pessimistic, in contrast toBush’s famous optimism.
Not coincidentally, Bush and Vice President-elect Dick Cheneyhave recently expressed fears that the economy is headed forrecession. That’s all the more reason, they said, why the reluctantCongress should pass the $1.3 trillion tax cut crafted during thecampaign by Lindsey.
A Democrat at Bowdoin College, Lindsey has been a leadingadvocate of the supply-side view that cutting tax rates can lead tohigher government revenues by giving people incentives to save andinvest.
Those fights go back decades. After serving on PresidentReagan’s Council of Economic Advisers, Lindsey wrote in his book,“The Growth Experiment” that Reagan’s 1981 tax cuts “contributedonly trivially to the booming deficits of the ’80s,” a viewcontrary to that held by many other economists.
More recently, he pumped up the argument with election-yearpolitics in a newspaper column in which he argued that the strongeconomy is due to Reagan’s tax cuts, not to President Clinton’sdeficit-reduction policies.
Bush’s father nominated Lindsey to the Federal Reserve’s Boardof Governors in 1991 in a move widely seen as the White House’seffort to fight the recession by pressuring the central bank tolower interest rates — an option hotly debated today amid forecastsof a slowing economy.
Traveling often on Bush’s campaign plane, the economist alsocrafted related policy, such as Bush’s plans to reform SocialSecurity, education, free trade and the nation’s dependance onforeign oil.
“I trust Larry’s judgment and admire his intellect,” Bush toldreporters during the campaign.
The Associated Press contributed to this report.