US President George W Bush has appointed Stephen Friedman to co-ordinate White House economic policy.

"I selected Steve for his wide experience and steady and sound judgment," Mr Bush said at a White House ceremony.

Mr Lindsey was ousted along with Paul O'Neill

"He understands the free-enterprise system. He knows how the economy works."

Mr Friedman's appointment follows days of speculation the nomination was in trouble.

It was believed Mr Friedman, 64, might be passed over for other candidates who would aggressively push the president's tax cutting economic agenda.

Conservative members of the Republican party were thought to have objected to Mr Friedman's alliances with moderate groups, such as the Concord Coalition, which backs deficit-reduction policies.

But administration officials said Mr Friedman's selection was delayed by questions about a minor heart condition that flared up last week.

In addition, an exhaustive review into his finances was also blamed for delaying the announcement.

More defections

With the economic recovery labouring, Mr Bush is keen on asking for more stimulus in the form of tax cuts and increased government spending - both of which would boost the nation's debt.

White House officials have reassured conservative Republicans that Mr Friedman backs the president's pro-growth plan as well as a new round of tax cuts.

The former co-chairman of investment bank Goldman Sachs replaces Larry Lindsey, who was forced out by Mr Bush, along with Treasury Secretary Paul O'Neill, on Friday.

So far Mr Bush has named three people to head his rebuilt economic team, after the resignations of Messrs O'Neill and Lindsey, as well as Securities and Exchange Commission Chairman Harvey Pitt.

More defections are expected.

Glenn Hubbard, who chairs the White House Council of Economic Advisers may resign as may Kenneth Dam, a deputy treasury secretary close to Mr O'Neill.