President Barack Obama talks with Chief of Staff Jack Lew during an elevator ride in the Eisenhower Executive Office Building. (White House/Pete Souza)
I suppose that he can't be much worse than Timothy Geithner, but that should be scant cause for cheer over the news that the president has nominated Jack Lew as Treasury secretary. Both championed the financial deregulation craze of the Clinton administration, and both are acolytes of Robert Rubin, the former Clinton Treasury secretary who unfettered Wall Street greed and then took his own considerable cut of the action.
Rubin went to work at Citigroup, the world's largest financial conglomerate whose legality was enabled by legislation he advanced while in government. He made off with a salary of $15 million a year during his decade at that bank, which specialized in toxic mortgage derivatives and had to be bailed out by taxpayers to avoid bankruptcy.
Lew's association with Citigroup was a far briefer and less rewarding three-year stint, but then the alternative investments unit of which he was chief operating officer in 2008 didn't do so well with its hedge fund and private equity investments. As Jia Lynn Yang points out in The Washington Post, "Massive losses in that unit helped drive Citigroup into the arms of the federal government, which bailed out the bank with $45 billion in taxpayer money that year."
But the taxpayer bailout did not interfere with Lew raking in more than $2 million in salary and bonuses in 2008, despite his unit's glaring failures. Nor did he seem to learn much from the experience as to the need for restoring the sensible government regulation of the financial industry that President Franklin Roosevelt had instituted to prevent another Great Depression and the Clinton administration had destroyed.
When asked by Sen. Bernie Sanders, I-Vt., at a Senate confirmation hearing in 2010, when Lew was nominated to be head of the Office of Management and Budget, whether the deregulation pushed by Rubin and former Fed Chairman Alan Greenspan had "contributed significantly" to the banking crisis, Lew responded:
"Senator, I don't consider myself an expert in some of these aspects of the financial industry. My experience in the financial industry has been as a manager, not an investment adviser. My sense, as someone who has generally been familiar with these trends, is that the problems in the financial industry preceded deregulation. There was an increasing emphasis on highly abstract leveraged derivative products that got us to the point, that, in the period of time leading up to the financial crisis, risks were taken, they weren't fully embraced, they weren't well understood. I don't personally know the extent to which deregulation drove it, but I don't think deregulation was the proximate cause."
Really? That is a statement of such deliberate ignorance that one must marvel at Lew's audacity in uttering it. He was one of the top economic officials in the Clinton administration when the president signed the Commodity Futures Modernization Act into law that declared all of those "derivative products" exempt from the reach of any existing government regulation or regulatory agency. It was aimed at silencing the warning of Brooksley Born, who, as head of the Commodity Futures Trading Commission, attempted to control the burgeoning market in the toxic assets that have carried such a huge human price in foreclosed homes and lost jobs.
Not only did Lew go along with the Clinton administration's policy, he continued to endorse a radical deregulatory approach to financial markets as a board member of the Hamilton Project, funded by Rubin at the Brookings Institution. Lew's myopic view of the origins of the economic meltdown, at odds even with Greenspan's own admission of culpability, hardly qualifies him for the top economic position in the Obama administration. As Sanders told the Post this week, "In my view, we need a Treasury secretary who is prepared to stand up to corporate America and their powerful lobbyists and fight for policies that protect the working families in our country. I do not believe Mr. Lew is that person."
But if we need that quality in a Treasury secretary, we certainly need it even more in the president, and given Obama's appointments -- from Lawrence Summers through Geithner and now Lew -- it is clear that he is not that person. In announcing Lew's nomination, the president only once referenced his chief of staff's Wall Street experience, noting, "He helped oversee ... one of our largest investment banks." That he also helped destroy it was buried as an inconvenient truth.
It is also an inconvenient truth for those "progressives" who gave Obama a pass on the dismal economic performance of his first term when he bailed out the banks but not their victims. At a time when the Federal Reserve continues to purchase $40 billion each month of Wall Street's toxic assets and provide the ever more concentrated financial conglomerates with interest free funds, the president dares brag that "We've put in place rules to prevent that kind of financial meltdown from ever happening again." No, he hasn't, and with Lew holding down the fort at Treasury, he won't.