News Column

Economic Outlook: Jack Lew

February 12, 2013

Anthony Hall


A nomination hearing for Jack Lew, a former Citigroup manager, to serve as U.S. treasury secretary would seem to offer a unique perspective on bank bailouts.

A Senate confirmation hearing is scheduled for Wednesday and this may be a beautifully ironic moment for listening to harsh questioning from members of the GOP about a program hastily slapped together in the waning months of the George W. Bush administration that has proven to be both successful and a symbol of government overreach.

The Troubled Asset Relief Program was the government's answer to a script written on a napkin that becomes a feature film. Former Treasury Secretary Henry Paulson Jr., with a serious background on Wall Street, dashed up to Capitol Hill with just a few sheets of paper outlining the multibillion-dollar bailout plan that the Obama administration inherited and that became the single most memorable program managed by Paulson's successor, Timothy Geithner. But now that Democrats were managing the Republican program, it fit conveniently into the template of GOP complaints about larger government getting in the way of the business community.

Now Lew, with an almost incidental background on Wall Street -- a two year stint at Citigroup -- is expected to be questioned on what was done with the $476.2 billion in cash and guarantees the government gave the bank during the crisis years.

"If taxpayers are going to prop up failed banks, they have a right to know what a key executive like Mr. Lew did at that time," said Sen. Orrin Hatch, R-Utah, ranking Republican on the Senate Finance Committee.

Lew will respond he was just a manager at Citigroup, serving as chief operating officer for the banks wealth management unit and later for their alternative-investments unit, The Washington Post reported.

He certainly was not in charge of $476.2 billion and he will argue, the Post said, that he was manager at the bank, not an investment banker.

On the other hand, regulatory appointments involving former Wall Street executives is a practice that is more than merely business as usual. Where else would the government go for experts in banking than directly to the banking community. Yet a Project on Government Oversight report released Monday noted some regulators are soft on the financial sector given the possibility their next jobs may be with the firms they are currently paid to police.

And then there's the money. In early 2009, Lew received a bonus from the bank of $940,000 and that's a ton of money in reality, but on the financial page, where chief executive officers rake in $10 million bonuses and where billionaires are created, this does not place Lew near the top of the corporate food chain.

Lew is not considered an extremely polarizing figure and, as such, is expected to survive the hearing process. But to smooth things over, he will say that he didn't know that much, do that much or make key decisions at the bank. He just worked there. Perfect!

Source: Copyright United Press International 2013

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