President Clinton Tuesday announced that Office of Management and Budget Director Franklin Raines will step down, saying he had tapped OMB Deputy Director Jacob (Jack) Lew to replace him.
Raines, who became OMB director in September 1996, will leave the White House May 20 to become chairman designate of Fannie Mae.
Clinton hailed Raines as a "brilliant" OMB director. He said Raines had informed him of the decision "in the last couple of days" and described Raines' new position as a "once-in-a-lifetime opportunity in the private sector."
Administration sources said there was some surprise at Raines' sudden departure, which many senior officials learned of only Monday night. One official said Raines had been expected to stay at least through the end of this year's budget process, but noted there was probably not a lot of hostility to Raines' decision to bail out.
"I regret his decision, but I certainly understand it," Clinton said.
As OMB director, Raines oversaw the historic balanced budget agreement. He came up with a set of principles for managing information technology projects, which became known as "Raines' Rules." Raines also pushed agencies to develop year 2000 computer conversion strategies and oversaw the development of the first governmentwide performance plan and the government's first set of consolidated financial statements.
Raines, who was vice chairman of Fannie Mae before going to OMB, is expected to become Fannie Mae's chairman and chief executive officer early next year, succeeding James Johnson.
Lew is an experienced Washington hand who began his career in 1973 as a Capitol Hill legislative aide and eventually rose to become a top adviser to former House Speaker Thomas P. "Tip" O'Neill. Lew, who was confirmed as OMB deputy director in August of 1995, had previously served as OMB executive associate director and as associate director for legislative affairs. As a White House aide from February 1993 through October 1994, Lew helped draft Clinton's national service initiative and his health care reform proposal.
Administration sources described Lew as a logical choice, noting he is well-liked and respected for his budget and legislative acumen. Lew has already been involved in the budget process at a level that is unusual for a deputy director, according to one administration source. "The president knows him well. As deputy, he was in every meeting," the source said. "It was always Frank and Jack."
Another administration official said: "Lew knows the Hill inside and out and is a veteran of all the budget wars. In that sense, there [is] no one better." Lew, this source said, was a principal architect of the administration's current Social Security strategy, counseling the president to launch the debate, but--in an effort to depoliticize the process--hold off on decisions until after this fall's elections. This source indicated Lew may seek to be more of a behind-the-scenes player than Raines. "Frank was very good on TV," he said. "As a spokesperson, [Lew] probably won't match Frank."
White House officials expect smooth sailing for Lew's nomination on the Hill. Immediate congressional reaction was limited, although House Budget Chairman John Kasich, R-Ohio, praised Raines as a "very talented" budget director. Senate Budget Chairman Pete Domenici, R-N.M., who negotiated with Raines on last year's balanced budget deal, called Raines "a man of great talent and patience" who "is tough, but ... has also been very fair in his dealings with me and the Congress."
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