Correction: A previous version of this story said that Lew worked at the Treasury Department during the Clinton administration. Lew was at the Office of Management and Budget.
It’s not every day you get a Treasury secretary nominee who once worked at one of the country’s biggest banks as it nearly imploded and took down the financial system. Yes, Jack Lew was a manager, not a financial trader at Citigroup [see my profile of Lew's tenure here]. And Citi's litany of problems began long before Lew became chief operating officer of the bank’s alternative investments group. But even if Lew wasn’t there for the bad decisions being made, he witnessed the aftermath. And the Senate Finance Committee has the chance to ask him what, if anything, he learned from the experience. After all, the Treasury secretary has new responsibilities for making sure something like the near-death of Citigroup never happens again.
Here are some questions lawmakers might consider asking.
Is a bank like Citigroup too big to be safe for the financial system?
More than any other bank, Citigroup has been labeled the poster child for the "too big to fail" debate. The godfather of Citigroup’s massive expansion, Sandy Weil, made news last summer when he said that the country’s biggest banks need to be broken up. Since the crisis, the bank has sloughed off many parts of its business, but some people think it’s still too big to run responsibly. Does Lew agree with Sandy Weil?
What does he think about the Volcker rule?
Lew’s unit, at least in 2007, was trying to boost the bank’s profits by making bets with some of Citigroup’s own money. This is exactly the kind of activity that the Volcker rule in the Dodd-Frank bill is designed to ban. The language for the rule has been in limbo for months, and some reformers fear it’s being watered down too much. Lew could potentially have a role in shaping the rule's final form.
What lessons does he take from the government's handling of Citigroup and other banks in 2008?
During my reporting, I reached out to a number of people who were working in the government during the bailouts who say they didn’t cross paths with Lew in 2008. But what does he think about the massive government bailouts of the big banks? For instance, should shareholders have been wiped out? What about the restrictions on those companies' executive pay?
Which parts of Dodd-Frank does he think would prevent a repeat of the financial crisis?
Lew is more familiar with budgets than financial regulations, and he said during his confirmation hearings for chairman of the Office of Management and Budget that he doesn’t see himself as “an expert in some of these aspects of the financial industry.” But thanks to the Dodd-Frank Act, the Treasury chief has to act more like a regulator, or at least like someone with an eye on systemic risks to the economy. Dodd-Frank is this country’s answer to the financial crisis. We'd like a sense for how much thought Lew has given to the regulatory measure.
How does he view the role of banks in the U.S. economy?
Lew was at the OMB in the Clinton administration during a big push to deregulate the industry. Wall Street expanded dramatically — and then nearly fell apart. How much should the U.S. economy be devoted to the finance sector versus other economic activities? Do we have the balance right?