Treasury nominee defends his Citigroup work, discusses tax reform before Senate panel

Treasury secretary nominee Jack Lew appeared before the Senate Finance Committee for his confirmation hearing on Wednesday. (The Washington Post)
February 13, 2013

Treasury secretary nominee Jack Lew on Wednesday defended his work at Citigroup and argued that his long career in government and business qualified him to become the President Obama’s top economic adviser.

After more than three hours of questions at his confirmation hearing, Lew appeared unruffled by grilling from Republicans about a wide range of topics, from his investment in a fund registered in the Cayman Islands to his thoughts on comprehensive tax reform.

The questions from the Senate Finance Committee, which is vetting Lew, reflected the widening responsibilities of the Treasury secretary, a role that shapes policy on trade, taxes, economic growth — and now banking regulation.

Given that increased oversight of the country’s banks, Sen. Orrin G. Hatch (R-Utah) pushed Lew to be more specific about his job at Citigroup, where he worked during the heart of the financial crisis from 2006 through the end of 2008.

“I learned a great deal about the financial products, but I wasn’t designing them and I wasn’t opining on them,” said Lew, who is Obama’s chief of staff. “I take away from that experience a deep understanding there are risks we have to be very much on guard against.”

Lew said he helped the bank cut costs, for instance, by shedding real estate.

“I actually think I performed quite well,” he said.

When asked about a nearly $1 million bonus he received from Citigroup as the bank was receiving taxpayer assistance, Lew said his pay was comparable to other people with similar jobs at banks. He said he would “leave to others to judge” whether accepting the pay had been the right thing to do.

Lawmakers spent much of the morning asking Lew about how he would overhaul the country’s tax system.

“I think tax reform is an extremely important priority,” said Lew, who was involved in the 1986 massive overhaul of the tax code. “I know how hard it is. I also know how important it is.”

He said that he was open to lowering the tax rate paid by companies but that he was also interested in establishing a minimum international tax rate — a move that could lower taxes for some companies but raise them for firms that employ tax havens to lower their rates to the single digits.

Republicans also grilled Lew on his investment in a Citigroup venture capital fund registered in the Cayman Islands at a house that has been singled out as an infamous tax haven.

Lew said he did not know about the address of the fund when he was an investor, and he acknowledged that it looked “riskier” than his usual investment picks.

He invested $56,000 in the fund and sold his investment in 2010 for $54,418, according to the Senate Finance Committee.

In response to questions about automatic spending reductions set to kick in March 1, Lew said he opposed the cuts. He also warned against focusing too much on deficit reduction in the near-term.

“I think in the longer term we have to get our fiscal house in order, but we can’t shortchange the investments that build the economy for the future,” said Lew, citing infrastructure and education as important areas where the government should spend more money.

Lew handled the confirmation so smoothly that toward the end of the hearing, Republicans on the committee were conceding that he was all but greenlighted for the job.

Once the the panel votes, the entire Senate will take up a vote. Staff members said Lew could be confirmed as early as the last week of this month.

Jia Lynn Yang is a staff writer at The Washington Post who covers policy and business. Before joining the Post, she worked at Fortune magazine.
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