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Timmy's Successor?
By JESSICA SILVER-GREENBERG and ANNIE LOWREY
As the Senate gears up to vote on the next Treasury secretary, President Obama’s choice for the job, Jacob J. Lew, has been forced to navigate through something of a political minefield.
As White House chief of staff and a former budget director, Mr. Lew has sought to show he has enough Wall Street experience to handle turbulent financial markets, but not enough to prevent him from reining in the powerful banking industry.
Mr. Lew, who is expected to win an initial nod from the Senate Finance Committee on Tuesday and sail on to approval in a full Senate vote, has battled a range of criticism, including questions about his lucrative tenure at Citigroup, a Cayman Islands investment and housing assistance he received as an administrator at New York University more than a decade ago.
To shore up his support, Mr. Lew has met privately in recent weeks with 41 senators and responded to 738 questions for the record. On Tuesday, he is scheduled to head to Capitol Hill for another meeting.
Much of the vitriol surrounding Mr. Lew’s nomination concerns the terms of his employment at Citigroup, which seemed to reward him for leaving the bank if he took a high-ranking position in government.
During Mr. Lew’s confirmation hearing, Senator Orrin Hatch, Republican of Utah, peppered Mr. Lew with questions about the terms of that contract, specifically challenging whether the contract violated the president’s efforts to “close the revolving door.”
Under the terms of Mr. Lew’s contract with Citi, he kept certain bonus compensation if he left for a “high level position with the United States government or regulatory body,” but not a competitor in the private sector, according to several people with direct knowledge of the contract.
Mr. Lew began his relatively brief immersion on Wall Street when he joined Citigroup in 2006 as chief operating officer of the bank’s global wealth management unit. But the role he took on in January 2008 as chief operating officer for the bank’s alternative investment unit stirred the most congressional ire.
Containing some of the most volatile investments at the bank, the unit plowed money into hedge funds and private equity investments. Those investments helped to catalyze Citigroup’s huge losses in the depths of the financial crisis, forcing the bank to take billions of dollars in taxpayer money.
In response to questions about the unit’s investments, Mr. Lew told lawmakers that he was more of a logistics man, overseeing the budget operations, rather than hashing out investment decisions. Mr. Lew has struck this neutral tone before. In 2010 confirmation hearings for budget director, Mr. Lew described himself “as a manager, not as an investment adviser.”
At one point, though, Senator Hatch questioned whether Mr. Lew saw e-mails about the sort of souring complex investments that brought Citigroup to near collapse. Also at issue for Senator Hatch was whether Mr. Lew knew that the unit had bet against some of the financial products it assembled. “Did you not know about the marketing of the sales products in the unit you managed, in which case I wonder what you did do?” Senator Hatch said.
Mr. Lew has maintained that he was not involved in those decisions. “Yes, I was aware that there were funds that were in trouble,” Mr. Lew testified, adding: “I didn’t have responsibility for the funds themselves, but I was aware that those difficulties were going on.”
The criticism of Mr. Lew reached a high pitch when Senator Grassley questioned whether Mr. Lew thought it was morally sound to take a $940,000 bonus in 2008, just a day before the bank took taxpayer money to help avert its demise. Mr. Lew said simply that he was “compensated in a manner consistent with other people.”
http://www.nytimes.com/2013/02/26/bu...l?ref=business
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