MEET THE FIRM OF...

By GEORGE J. CHURCH

A bunch of investment bankers and lawyers, friendly to the stock market, heavily focused on balancing the federal budget. Sounds like the kind of firm whose ideas of government traditional Democrats would instinctively distrust. But Raines, Rubin, Daley & Bowles is only metaphorically a Wall Street firm. In fact, it is the team chosen by Bill Clinton to shape economic policy in his second term.

The firm--er, team--is still adding partners--er, members. Robert Rubin, of course, is thoroughly entrenched as Treasury Secretary and a kind of managing partner; Erskine Bowles left his North Carolina investment firm to become White House chief of staff immediately after the election. Last week Clinton formally added Franklin Raines, a former partner at Lazard, Freres & Co., by announcing that he would keep Raines as head of the Office of Management and Budget, a job Raines got in September. Daley, son of the famous Chicago mayor, who as a lawyer might be thought of as counsel for the firm, was named Secretary of Commerce.

Gene Sperling, another lawyer, became in effect the junior partner of the firm when he was named head of the National Economic Council. Sperling, nicknamed "Gene the Machine," is more noted for his ability to grind out thorough policy-option papers than for being a brilliant academic economist. So while on paper the NEC is supposed to be an economic counterpart to the National Security Council, under Sperling it is unlikely to have as much clout as it did when Rubin ran it before moving to Treasury.

If the appointments proved anything, it was that Clinton does not need Dick Morris to stick to a centrist course. The Administration's most noted liberals, like Labor Secretary Robert Reich and Housing and Urban Development Secretary Henry Cisneros are leaving. Cisneros' swan song was a blast at Raines' OMB for proposing too deep a cut in low-cost housing subsidies.

In contrast, the new men "are don't-rock-the-boat appointments, and they are exactly what Wall Street wants," says David Jones, senior economist at Aubrey G. Lanston, which really is an investment-banking firm. Certainly the President gave that impression when he announced the economic appointments and some others (the most interesting: Janet Reno will after all stay on as Attorney General). Clinton praised the "vibrant" stock market as increasing not only the wealth of the rich but also the retirement savings of the middle class. And he even offered a tepid endorsement of a capital-gains-tax cut, an issue that has long roused almost religious passion among conservative Republicans (for) and liberal Democrats (against). The President calmly implied he just might accept one as part of a balanced-budget deal.

The principal burden of negotiating such a deal has fallen to Raines. He holds perhaps the highest economic-policy post ever achieved by an African American. Hardly anyone ever speaks of diversity when talking about him, though. He is accepted as simply a sharp intellect (Rhodes scholar, Harvard Law, vice chairman of the mortgage-finance institution Fannie Mae) and a classic American success story. Last year, when asked to join the board of Boeing, he recalled that his mother once cleaned the company's Seattle offices. In the budget negotiations, Raines a few days after the election naively tried to talk G.O.P. congressional leaders into joining the Administration in a united budget proposal. He lost, of course, but proved his resolute bipartisanship.

--By George J. Church. Reported by Michael Duffy, J.F.O. McAllister, Karen Tumulty and Adam Zagorin/Washington

With reporting by MICHAEL DUFFY, J.F.O. MCALLISTER, KAREN TUMULTY AND ADAM ZAGORIN/WASHINGTON