From Wall Street failure to the pinnacle of finance in four short years.
The Wall Street Journal
1/28/2013
There was a time when you had to be successful on Wall Street to become secretary of the Treasury. Now along comes presidential nominee Jack Lew, whose only business credential is a stint at the most troubled too-big-to-fail bank.
During the darkest days of the financial crisis Mr. Lew served as the chief operating officer of Citigroup’s Alternative Investments unit (CAI). When Mr. Lew took this job in January 2008, the unit was already infamous for overseeing “structured investment vehicles” that hid mortgage risks outside Citi’s balance sheet. It also housed internal hedge funds that were in the process of imploding.
CAI no longer exists. At the end of Mr. Lew’s first quarter on the job, the unit reported a $358 million loss. Things got much worse after that but Citi stopped breaking out CAI results in its earnings releases. The unit was eventually shuttered and many of its assets were sold.
There probably weren’t many laughs at Citi during the market panic in 2008. But if someone had said that a CAI executive would be the secretary of the Treasury within five years, the line would have brought the house down…
…Defenders of Mr. Lew say that by the time he showed up at CAI most of the bad decisions had already been made. But even if Mr. Lew didn’t create the mess, the taxpayers who ended up underwriting his seven-figure compensation might want to know what exactly he was doing to clean it up. All we can find is a list of things that Mr. Lew and his allies claim he was not responsible for.
It might also be instructive to learn what Mr. Lew was thinking as he took the Citi job. Did he understand that he was sailing into an iceberg, or did he believe that the unit was putting its problems of 2007 behind it? This is important because, thanks to the 2010 Dodd-Frank law, it is now the job of the Treasury secretary to spot financial icebergs…
…There are other questions. In 2004 the student newspaper at New York University, where Mr. Lew was working at the time, reported on a discussion he held with students. According to NYU’s Washington Square News, Mr. Lew said he had turned down “attractive” banking jobs because he wanted to “do something bigger.” NYU “mattered a lot more to me than whether or not consumer loans are up or down,” he added.
Citi obviously made an offer attractive enough for Mr. Lew to get over the fact that he didn’t care about consumer credit markets. But a Treasury secretary should care…
The greatest irony is that given Mr. Lew’s crisis-era resumé, he bears a remarkable resemblance to the bankers who President Obama says created the financial crisis and deserve federal investigation…
Read the complete article at The Wall Street Journal.
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