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