President Obama’s reelection campaign was built on class warfare and resentment of the wealthy. He spoke broadly about the sins of Wall Street and the financial sector. He vilified his opponent, Mitt Romney, for making money on financial transactions and investing money overseas. He particularly singled out investments Romney had in the Cayman Islands for scorn. These facts, in Obama’s campaign rhetoric, disqualified Romney from the Presidency. They were, however, the exact traits Obama looks for in a Treasury Secretary.
Jack Lew, Obama’s pick to be the next Treasury Secretary, is mostly a government man. A long-time Hill staffer, he headed the OMB in both the Clinton and Obama Administrations. Prior to his nomination, he was White House Chief of Staff. He spent a few years as a private attorney in between Administrations, working mostly on environmental and energy issues. In the run-up to the financial crisis, though, he secured a sinecure on Wall Street.
At least, it was likely meant to be a sinecure. In 2006, Lew went to work at Citigroup, which was flying high in the middle part of the last decade. He was a top executive at the bank, rising to head up the bank’s “alternative investments” portfolio, which was heavily leveraged in things like mortgage-backed securities.
When the financial crisis hit, the funds Lew oversaw blew up, costing Citigroup hundreds of millions of dollars. As the contagion from these investments spread, the bank was forced to take billions of federal dollars in a government bailout. Lew left the bank in 2009, amid the debris of the financial ruin, pocketing a nearly $1 million bonus.
Lew also invested a portion of his Citigroup compensation in an investment fund the bank managed, based in the Cayman Islands. Lew invested at least $56,000 in the offshore fund, but yesterday in his confirmation hearing, he claimed not to know where the fund was located. This is exactly how normal people behave. We throw tens of thousands of dollars into an investment without bothering to ask what the investment is and where it is located. Sometimes, we accidentally stumble on investing in a place that Obama has identified as the world’s foremost tax haven. We’re just lucky that way.
Secretary of the Treasury is the government’s chief operating officer for the private economy. It is also the government’s chief spokesman to the world markets. The office was first occupied by Alexander Hamilton and is meant to assure markets and the business community that America’s fiscal policy is under adult supervision.
Instead, Obama has chosen to mix-it-up. He has nominated someone with at least a supporting role in the financial crisis that blew up the economy. He has tapped someone who profited enormously while taxpayers bailed out the bank where he worked. He took some of that profit and parked it off-shore, with at least the intention of minimizing his tax bill.
In other words, he did many of the things Obama attacked Romney for doing. It disqualified Romney from the White House. But, it earned Lew a seat in Obama’s cabinet.