At the peak of its power, the U.S. Treasury Department was the second-largest law enforcement agency in the country, responsible not just for guarding the nation's finances, but also for patrolling the coastline, enforcing gun and alcohol rules, and protecting the president.
Today, it is struggling to maintain influence over some core issues, such as tax policy, in an administration that has largely sidelined the agency as a policymaking tool and often shut out its top experts from White House deliberations, according to economists, policymakers, and present and former Treasury officials from both parties.
 
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The department's woes were underscored by the recent public travails of Treasury Secretary John W. Snow, reappointed by President Bush only after weeks of leaks and rumors from administration officials that he was going to be replaced.
But the issue runs deeper than a single personality. Frustration over the department's weakened state recently contributed to the resignation of Wayne A. Abernathy, the assistant secretary for financial institutions, according to current and former Treasury employees, including Abernathy's predecessor in the job. Another high-ranking job, the assistant secretary for tax policy, has gone begging.
Abernathy declined to comment.
"Certainly when I was there, we worked very closely with [White House staff]; having the White House engaged on your issue meant you had strong backing and the political muscle if you needed it," said Abernathy's predecessor, Sheila C. Bair, a University of Massachusetts finance professor who was in the job until 2002. "The concern is, it's gone too much the other way, that the White House is driving it and not working collaboratively with Treasury."
The Treasury "should be a key formulator of policy," Bair said. "But the perception is that Treasury has become the cheerleader and deliverer of the message."
The pattern began in Bush's first term, when the White House abandoned the Clinton administration's practice of including the Treasury secretary in its daily political meeting and routinely rebuffed Secretary Paul H. O'Neill for his worries about budget deficits and tax cuts.
More recently, as congressional leaders and Washington lobbyists drafted corporate tax-cut legislation last fall, Treasury experts with strong objections were muzzled, according to a current Treasury employee and two senior Senate tax aides, who spoke only on condition of anonymity. Snow did not air his concerns about the legislation until it was just days from passage, too late to effect dramatic change.
The situation marks a major change for an agency that, in contrast with Education, Veterans Affairs and other departments, is not bound by a single subject or constituency, and has thus prided itself on looking at economic issues with the broader good in mind.
The Treasury "was one of those agencies you could always rely upon to provide a real base of information. It didn't always win, but it designed proposals for the public interest at large," said C. Eugene Steuerle, who headed the department's Office of Tax Analysis during the Reagan administration. Now, he said, "on a lot of issues, sometimes it doesn't have a seat at the table."
There is also concern about whether the department's clipped wings will damage the country's leadership in international financial circles at a time when the dollar is falling and the trade deficit is surging. Those trends may require the Group of Seven major industrial countries to act in a coordinated fashion to avoid a financial crisis.
During the 1990s, when Robert E. Rubin and his successor, Lawrence H. Summers, were heading the department, officials from Europe, Canada and Japan often fumed about being pushed around in the G-7 by the assertive Americans. But now, some policymakers from those countries say -- on condition of anonymity -- that they are worried about the opposite problem: Washington's ability to mobilize support may be hampered, in part because the Treasury seems to lack solid White House support.
"After about a year of the current administration, some of my Japanese friends would take me aside -- people from the Ministry of Finance and [the] central bank -- and they would say, 'What's happened to Treasury?'" said Robert C. Fauver, a former career Treasury official who was a deputy undersecretary of state in President George H.W. Bush's administration. "At the moment, Treasury's interagency standing -- I'm not talking about the Cabinet-head level, but the department -- is the lowest in the 30 years that I've watched."
