There are some misunderstandings out there about Jack Lew, Obama's pick to run the Treasury Department, which is what you get with a relative cipher like Lew.
One thing is clear enough, from his association with former Treasury Secretary Robert Rubin to his stint at Citigroup to his professed lack of expertise in financial markets: His track record should not inspire any hope that he will care much about financial reform.
First, the misinformation: The Washington Post has a breathless story Friday headlined "Jack Lew Had Major Role At Citigroup When It Nearly Imploded." This comes about two years after The Huffington Post first reported on his role at Citi, where he was chief operating officer of a couple of investment units for about two years.
Lew's role at Citi was hardly "major," at least not when it came to the investment decisions of the divisions where he worked. In fact, he was likely kept far, far away from those decisions. As chief operating officer, he had an exalted title and definitely made a lot of money -- including millions in salary and a $950,000 bonus in 2009, after Citi was bailed out. But he handled back-office matters like payroll. As Bloomberg wrote earlier this week, Lew's job was "overseeing budget, finance and operations" at the unit. He made the trains run on time, in other words.
The Washington Post article claims that "More than 15,000 financial advisers and bankers worked under Lew," which is maybe true in the sense that they were lower than him in the corporate pecking order, or maybe worked on a lower floor. But none of those bankers or financial advisers answered to Lew about investment decisions.
And Lew had nothing to do with the many controversial investments in Citi's alternative investments unit -- including a bet on John Paulson's hedge fund, which was at the time betting against subprime mortgage-backed securities. When he jumped to that unit 2008, the financial crisis was already in full swing and Citi was well on its way to a huge government bailout. As the Washington Post article points out:
A press release announcing his new position as chief operating officer of the group said he would “oversee coordination between the operations, technology, human resources, legal, financial and regional departments.”
He was the chief office manager, in other words, same as his other job.
What's possibly more troubling about Lew is how he got to Citigroup, along with the fact that he apparently managed to spend a couple of years on Wall Street without learning too much about markets.
His position at Citi was secured on the recommendation of Rubin, who knew him from their years working together in the Clinton administration and was on Citi's executive committee in 2006.
The connection to Rubin is particularly troubling, as Rubin was the chief architect of the financial deregulation in the 1990s that helped set the stage for the crisis. Lew was not as close to Rubin as were Tim Geithner or Larry Summers, writes Michael Hirsh in the National Journal. But he at least owes Rubin for his big Wall Street payday.
And he seems to have adopted Rubin's attitude about regulation, telling a Senate hearing in 2010 that he didn't think deregulation was the "proximate cause" of the financial crisis. That put him at odds with conventional wisdom, and squarely within the worldview of the Rubinites.
So here's what we know about Lew when it comes to financial reform: He's someone without expertise in finance, but who nevertheless collected a paycheck from a bailed-out Citigroup and shares at least one of Robert Rubin's opinions about regulation.
Lew may yet surprise us. He is consistently described as smart, thoughtful and capable. Reformers are hoping for the best. But we should prepare for something less.
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