ASHINGTON, Jan. 16 — The White House said today that President Bush's top economic adviser, who had served as a paid consultant to the Enron Corporation (news/quote) before joining the administration, had directed a review of the broad economic effects of a potential collapse of the company but concluded it posed little risk to the American economy.
The adviser, Lawrence B. Lindsey, who heads the National Economic Council, has said recently that unlike Treasury officials, he never received phone calls from Enron executives seeking help. Mr. Lindsey was paid $50,000 in 2000 for work on an Enron advisory board.
The White House said Mr. Lindsey began his review of the potential impact of Enron's troubles in mid-October, based on news reports of the company's troubles. White House officials said the review began two weeks before the chairman of Enron, Kenneth L. Lay, called Paul H. O'Neill, the Treasury secretary, and Donald L. Evans, the secretary of commerce, suggesting that any Enron collapse might ripple through the American and global economies.
"The government did exactly what the government should do," the White House press secretary, Ari Fleischer, said tonight in a statement after being questioned about Mr. Lindsey's role at his afternoon news briefing.
Ordinarily, any official who served as a consultant or lawyer for a company observes a period of a year or more once entering the government during which he or she avoids making decisions involving the company.
Mr. Fleischer said Mr. Lindsey's examination of Enron posed no conflict of interest. Until Mr. Fleischer's statements, however, the White House had given no indication it had conducted any review of Enron's troubles or the potential impact.
After Mr. Lay called Mr. O'Neill and Mr. Evans in late October, Treasury officials conducted a study, and it appears to have overlapped the review the White House says Mr. Lindsey had already begun. The Treasury study focused on whether an Enron collapse might create a global market upheaval like the failure of Long-Term Capital Management, a hedge fund, did in 1998.
Government ethics rules state that members of the executive branch are obligated to recuse themselves from a matter if they "determine that a reasonable person would question their impartiality."
Democratic strategists, who have criticized Mr. Lay's calls to Mr. Evans and Mr. O'Neill, pounced on the news, saying that Mr. Lindsey should not have conducted the inquiry so soon after working for Enron.
"This is very troubling," said Jennifer Palmieri, a Democratic National Committee spokeswoman. "It is a significant conflict of interest for the former Enron economic adviser to be doing an analysis about Enron as the president's economic adviser.
"Most importantly, it shows once again that the administration did a lot of thinking about the fact that the company was going to collapse but they did absolutely nothing to make sure that 50,000 Enron employees would not lose their life savings."
Tonight, Mr. Fleischer said that Mr. Lindsey and his aides at the National Economic Council focused on whether "natural gas disruptions could occur or the national economy could be harmed."
"They also looked at currency markets, equity markets, bond markets and other financial indicators to determine if there were indications of a shortage of liquidity that might signal a more widespread problem," Mr. Fleischer said in his statement.
At some point, Mr. Lindsey's office coordinated its work with the Treasury's study. But it was not clear whether Treasury officials told Mr. Lindsey that Mr. Lay had raised the prospect of a broader meltdown.
In his news briefing, Mr. Fleischer asked: "About whether Enron's collapse has implications for the economy, I think if the administration didn't look at that, you would be asking `Why wouldn't you?' "
Indeed, some Congressional Democrats have criticized the administration for inaction, arguing that Mr. O'Neill and Mr. Evans had an obligation to alert the public of Enron's situation once they learned of it.
Mr. Lindsey is one of several Bush administration and Republican officials with ties to Enron. Among others, Robert Zoellick, the United States trade representative, served on an Enron advisory board in 2000; Karl Rove, Mr. Bush's senior White House political strategist, held more than 1,000 Enron shares before selling them in June; and Marc Racicot, the former Montana governor whom Mr. Bush picked to run the Republican National Committee, worked as an Enron lobbyist last year.
Paul Krugman, an editorial columnist for The New York Times (news/quote), said he was also paid $50,000 to serve on an Enron advisory board in 1999. He disclosed his connection in a Jan. 24, 2001, column about Enron.
"This was an advisory panel that had no function that I was aware of," Mr. Krugman said today. "My later interpretation is that it was all part of the way they built an image. All in all, I was just another brick in the wall."