Lew’s Senate Finance hearing as Treasury Nominee
by Linda Beale
Lew’s Senate Finance hearing as Treasury Nominee
Jack Lew, former budget director under Clinton and Obama and former Obama chief of staff, answered questions at Senate Finance today in his bid to succeed Tim Geithner as Treasury Secretary. See, e.g., Rubin & Klimasinska, Lew Says He Didn’t Know Money-Losing Investment Was in Caymans, Bloomberg.com (Feb. 13, 2013) and other related articles linked below.
When he was first nominated, I noted that I found his candidacy somewhat worrisome. While there are a number of considerations that suggest a decently competent person, there are also some suggestions of a person who has lived in the “Wall Street” flow too long and thus falls into line with the typical Wall Street/mainstream economics thinking–thinking which ultimately supports policies that will continue to slide towards oligarchy.
The hearing focused on several interesting aspects of Lew’s career and investment choices.
1) Investing in the Caymans. Lew made an investment of 50 to 100 thousand in a Citigroup fund based in theCaymans while he was at Citigroup, and claimed that he didn’t know it was an offshore investment. He got out of it when he went into government and lost money on it.
ME: There we have it–like most rich people, he just didn’t care enough to consider closely whehter his investment was in a tax haven country and certainly didn’t ponder the negatives .
2) Compensation at Citigroup. Lew got a “bonus” of $940,000 in January 2009 when Citigroup was receiving federal bailout funds. He defended it as being paid in the same way other private-sector employees in similar jobs were paid.
ME: But there was a ridiculous racheting up of financial sector compensation during the years when the big banks were feeding at the trough of easy mortgage securitization money and derivative speculation. Shouldn’t someone that we hire as the head of Treasury have been more aware of that speculative binge? Or shouldn’t that person be at least somewhat ashamed now that such an exorbitant “bonus” (10 times what most Americans receive in annual pay) should have been funded, in essential part, by taxpayer bailouts of his institution?
Now, Orrin Hatch (GOP-Utah) tried to make a big deal out of Lew overseeing the Financial Stability Oversight Council in administering the Volcker Rulelimiting proprietary trading, saying that “it could lead to an awkward situation in which, in your role as chair of the FSOC, you would effectively be saying to financial firms: ‘Do as I say, not as I did.’ ” Hatch claimed that this issue “bear[s] directly on your qualifications.” I’m not so sure that is such a big worry since I think it is advantageous if Treasury has some understanding of how big banks trade, but it is just one more piece of Lew’s overall nature of being well-attuned to Wall Street (and not so well-attuned to Main Street).
3) Corporate taxes. Lew suggested in the hearing that Republicans and Democrats could “work together” so that changes in the international tax scheme could lead to lighter burdens on some foreign income of US multinationals. The Bloomberg report notes that he supported a global minimum tax, but indicated that could be nominally territorial, with limits on offshoring income to tax haven countries.
4) Earned benefit programs. Lew is one of those Democrats who is more right of center than the party’s base. He still mentions the need for “entitlement” program changes as well as additional revenue increases as a part of “balanced” deficit reduction.
ME: This is one of the most disturbing aspects of the Lew nomination. He is pushing the GOP agenda of deficit reduction and “entitlement” reform when instead he should be staunchly defending the New Deal against the oligarchs who want to shrink government, diminish the safety net, end any support for innovative environmental and energy progrms, yet continue to reap benefits from the long-term government subsidies for Big Oil…..We should not tamper with Social Security–and there is no deficit reason for doing so.
cross posted with ataxingmatter
From the Chief Actuary of SS in Congressional testimony this week:
“Is it fair to say,” Sen. Merkley said, “that Social Security does not contribute to the national debt?”
“I don’t think that’s right, Senator,” Elmendorf responded, before explaining the fiction of the accounting of the Social Security trust fund.
“The program is actually a drain on the budget today,” Elmendorf said.
pam martens expounds a bit on linda’s second point: Senator Orrin Hatch Drops a Bombshell at Jack Lew’s Confirmation Hearing
At last we know how the grease is funneled to that revolving door between Wall Street and Washington. One only gets a $940,000 bonus from Wall Street’s Citigroup if you can land a “full time high level position with the United States Government or a regulatory body.” It can’t be just a part-time job, mind you; and you can’t be rank and file. Citigroup’s dangling carrot will only pay $940,000 if the company can add a “high level” government mover and shaker to their gold-plated Rolodex…
this is the wrong place for your comment.
but Elmendorf is NOT the chief actuary
and he IS a liar.
I found the site were Krasting gets his Revealed Truth
I don’t know where you cross the line between damned lies and gibbering insanity, but if you want to see how it looks: (well try google: Elmendorf Merkley )
hard to tell from here if your comment refers to Lew or Elmendorf
but, yes. Geithner appears to be part of the conspiracy to loot the United States of America for the benefit of the banks.
isn’t it wonderful to know it’s Bi-Partisan.
well, here is some insight into Obama appointees.
It’s unfortunate that Krasting has chosen to go off on a tangent via a different Senate hearing, as far as I can tell. Interestingly other than the link to Townhall.com and Kevin Glass’s column there, Real Talk, which should more appropriately be RealSpeak, there seems to be no reference to the Elmendorf “testimony” answering Merkley’s question. Worse yet Bruce K. only sees fit to quote a small part of what Elmendorf gave as a reply. The next paragraph notes that Elmendorf continued with “”The program is actually a drain on the budget today,” Elmendorf said. Social Security does collect money from interest payments made to the Social Security trust fund, but “even taking the interest on board, in 2017, the combined trust funds will be running a deficit even including the interest payments they’re receiving.” Exactly what budget is Elmendorf referring to? Is it the legal fiction referred to as the unified budget?
He must not be familiar with the most recent legal status of the Social Security budget relative to the general budget. The SSA web site states clearly:
” The BEA budget treatment of Social Security basically remains the law to the present day. Specifically, present law mandates that the two Social Security Trust Funds, and the operations of the Postal Service, are formally considered to be “off-budget” and no longer part of the unified federal budget. (The Medicare Trust Funds, by contrast, are once again part of the unified budget.) So where matters stand presently is that the transactions to the Social Security Trust Funds and the operations of the Postal Service are “off-budget” and everything else is “on-budget.”
So Elmendorf’s reply regarding a budget deficit can only refer to the Trust Fund running a deficit. If that is even the proper way to express it? When we take assets from savings in order to support an on going expense for which there is insufficient income over a period of time is that defined as a deficit? Maybe, but it is certainly not an increase to the general budget any more so than redeming any other form of Treasury debt can be considered a deficit.
Elmendorf is conflating the general budget with the Social Scurity/Trust Fund budget. The Trust Fund will not be deficient in any way in 2017. The Social Security benefits budget may run a deficit and that will be supplemented by Trust Fund assets. It isn’t really that difficult to understand unless one simply is trying to obfuscate the relationship between Social Security funds and general budget funding. The Turst Fund is a creditor to the general budget. Intergovernmental it may be, but the assets of the Trust Fund did not come from general income taxes. Those assets are the result of working Americans contributions to a retirement system said to b e guaranteed by the full faith and credit of the Unoted States of America. Elmendorf is conflating the facts and Kevin Glass is distributing the lie.
i am thinking there are two other tortured facts that would keep Elmendorf safe from a perjury charge:
one is if the Trust Fund is paying down principle… Elmendorf specifically referred to “interest.”
the other is if he was talking about Treasuring making up for the payroll tax holiday. this is what the payroll tax holiday was all about:
a way of partially and temporarily “killing” Social Security so that it would “arguably” run a deficit that they could talk about ..
but the fact remains that it was not Social Security that ran the deficit… it was the payroll tax holiday that prevented the people from paying into their retirement fund.