The Bush administration was last night scrambling to make an early announcement of its new Treasury Secretary and chief economic adviser following the forced resignations of Mr Paul O'Neill and Mr Larry Lindsey on Friday.

The White House is likely today or tomorrow to reveal the successors to the two most senior economic posts in the administration.

Washington officials and observers said that Mr Stephen Friedman, a former chairman of the investment bank Goldman Sachs, was almost assured of the position as chief economic adviser and chairman of the National Economic Council.

Mr Friedman, currently a senior partner at Marsh & McLennan Capital, is close to Mr Josh Bolten, deputy chief of staff to President George W. Bush. Sources said Mr Friedman has already been approached about heading the National Economic Council and has told associates he will accept a formal offer.

Doubt remained over Mr O'Neill's successor as Treasury Secretary. Mr Don Evans, the current Commerce Secretary, is one front runner, but congressional officials have been lobbying for other names, including Mr Gerry Parsky, a venture-capital financier who headed the Bush election campaign in California.

California Republican Mr David Dreier, one of Mr Bush's closest allies in Congress, has been lobbying the administration on Mr Parsky's behalf and said his long-time friend has made it clear he would be "willing to serve the president" as treasury secretary or in another capacity.

"I have in the last month talked to him (Parsky) and indicated I thought he would be good as a member of the economic team," Mr Dreier told Reuters, adding that he has raised Mr Parsky's name withWhite House officials.

Mr Parsky, who co-chaired Bush's presidential campaign in California with Mr Dreier, was floated as a potential candidate for the treasury when Mr Bush was preparing to take office.

The 60-year old chairman and founding partner of Aurora Capital Partners, a Los Angeles firm specialising in acquisitions, is a Bush family friend - something the president has valued in others in his administration.

Mr Parsky has Washington mileage as well.

He served as assistant treasury secretary in the Ford administration in the 1970s.

Mr Phil Gramm, the outgoing senator for Texas, and Mr Charles Schwab, founder of the eponymous financial brokerage, also remain possible appointments.

Other candidates to replace Mr O'Neill include prominent academics, led by Stanford University economist Mr Michael Boskin and former lawmakers like Texas Republican Mr Bill Archer.

A former administration official said that the White House seems already to have made up its mind on the top two appointments.

The appointment of Mr Friedman, who has good connections in policy-making circles, would probably increase the Bush administration's standing with the financial markets.

Mr Jon Corzine, Democratic senator for New Jersey and himself a former co-chairman of Goldman Sachs, said: "I think Friedman's a very capable man. He's intellectually disciplined in how he approaches problems".

The delay in announcing the replacements for Mr O'Neill and Mr Lindsey reflected the haste of their resignations.

Although their departures had frequently been rumoured, the pressure to go came as a surprise, particularly to Mr O'Neill, who announced his immediate resignation, leaving the White House scrambling to line up his successor.

The shake-up of the economic team could also involve Mr Glenn Hubbard, chairman of the White House Council of Economic Advisers, moving to the Treasury as deputy secretary.

Mr Bush is counting on his choices to garner the respect of both Wall Street and Main Street - respect Mr O'Neill and Mr Lindsey failed to earn.

The new team will also be expected to champion a tax-cutting agenda - something the White House hopes will bolster Mr Bush's chance of re-election in 2004.

Mr Bush has said several times he wants to make his 2001 tax cuts permanent.

A stagnant economy could be his biggest political liability.

The earliest test for the new economic team will come with decisions about the appropriate mix of stimulus and restraint in a short-term economic package expected next month and in the Bush budget, due in early February, for the next fiscal year.

Many moderate Republicans in Congress continue to balk at the idea of more tax cuts at a time when future budget deficits are projected to grow ever larger. - (Financial Times Service, Reuters)