A day after New Year’s in 2008, Citigroup announced that one of its most troubled units had a new chief operating officer: Jack Lew.

In a sea of Wall Street traders and hedge fund managers, Lew stood out. He was a career government bureaucrat who had joined Citigroup 18 months earlier hoping to gain experience in the business world. Now he was getting more than he could have imagined.

In the following months, as the entire bank teetered, Lew’s group would cope with massive losses, lawsuits from angry investors and probes from government officials. The group, called Citigroup Alternative Investments, had been overseeing one of the most toxic parts of the bank’s business, known as structured investment vehicles — unregulated entities that threatened to send Citigroup, as well as the broader financial system, over the edge.

By the fall, Citigroup turned to taxpayers for a massive bailout. In the end, the bank received more government assistance than any other company, totaling $476.2 billion in cash and guarantees, according to the Congressional Oversight Panel.

Lew, President Obama’s choice to be the next Treasury secretary, is set to face questions about his work at Citigroup at his upcoming Senate confirmation hearing. Although Democrats expect Lew to be confirmed quickly, some Republicans have complained about his tough approach in past budget battles.

President Obama joked about Jack Lew’s illegible signature after he announced his nomination of the current White House chief of staff for Treasury secretary. (The Washington Post)

His time at Citigroup is an x factor. Not much is known about his role at the bank during a pivotal moment for the U.S. financial system.

Sen. Charles E. Grassley (R-Iowa) said he intends to ask Lew about a $940,000 bonus he got from Citigroup just before the bank received government assistance.

“The Treasury secretary can’t owe anyone on Wall Street any favors,” Grassley said in a statement. “He has to be independent from special interests and put taxpayers first.”

Lew has not said much about Citigroup. The White House did not respond to repeated requests to answer questions, referring inquiries to the bank. Lew, currently Obama’s chief of staff, declined to comment for this article.

In his confirmation hearings after he was nominated to head the Office of Management and Budget in 2010, Lew said that he was only a manager at the bank, not someone enmeshed in Citigroup’s trades or financial strategy — a picture confirmed by former colleagues at Citigroup. And the seeds of Citigroup’s problems were planted long before Lew arrived there.

But Lew’s years at Citigroup could become especially relevant if he is confirmed as Treasury secretary, as that job now shoulders a new level of responsibility overseeing the country’s biggest banks.

As Treasury secretary, Lew would head up a council of regulators surveying the financial system for excessive risk. And he would have a hand in shaping a controversial new regulation, known as the Volcker rule, which seeks to ban banks from gambling with their own money — exactly the kind of activities that were part of Lew’s old business unit at Citigroup.

“His résumé isn’t sterling from this perspective,” said Mark Williams, a lecturer on finance at Boston University and a former Federal Reserve bank examiner. “Citigroup was one of the bad firms on Wall Street.”

Lew wound up at Citigroup because of Robert Rubin, an influential former Treasury secretary who worked at the bank from 1999 to 2009, according to Lew’s first boss at Citigroup, Todd Thomson.

“Bob said, ‘This guy Jack Lew, he’s really terrific . . . and he wants to get into business,” said Thomson, who was head of Citigroup’s global wealth management when he met Lew in 2006.

Thomson said he talked with Lew, then chief operating officer of New York University, over the course of a few months and was immediately impressed, despite the fact that Lew didn’t have any banking experience.

That summer, Thomson created a job for him — chief operating officer of Citigroup’s wealth-management division. Thomson said that Lew would represent him in meetings and that he turned to Lew for tasks that needed to be handled delicately.

“At a big company, it’s fraught with a lot of different issues,” said Thomson, who is now chief executive of investment firm Headwaters Capital in New York. “You need somebody who’s an adult, who goes about it with a zero-politics kind of approach, comes across as non-threatening. Jack was perfect for that role.”

The company during that time had brokers who sat in individual Citigroup bank branches and another set of brokers who joined the company when Citigroup acquired Smith Barney. Thomson wanted to combine the brokers, moving the branch employees over to Smith Barney. There was a risk, though, that egos would be bruised. So Thomson picked Lew to lead the effort.

“Things that I asked Jack to do always were done [where] everything went more smoothly,” said Thomson. “There was less noise. There was less emotion. We got results more quickly.”

Lew’s time at the wealth-management division was relatively placid. Revenue grew steadily.

Meanwhile, big changes were afoot at Citigroup.

A year after Lew joined the bank, Citigroup paid $800 million for a hedge fund called Old Lane. The bank had its eye not only on the fund and its clients, but on the man running the operation, Vikram Pandit. Once the acquisition was completed, Old Lane became the bank’s primary hedge fund, housed in its alternative investments unit, CAI.

At the same time, a downturn in the housing market was becoming a full-blown crisis for Wall Street, courtesy of the complex financial instruments invented by the industry. By the fall, losses tied to subprime mortgages began wiping out profits at banks everywhere — but especially at Citigroup.

In November 2007, chief executive Chuck Prince stepped down. Pandit, who only months earlier was running Old Lane, was named the bank’s new leader, leaving holes at the top of CAI.

Ned Kelly, an executive with experience handling investments, became head of the group. But CAI also needed someone with hefty management experience.

The bank turned to Lew, according to Michael Schlein, a former president at Citigroup who has known Lew for years.

“They complemented one another well,” said Schlein, now president and chief executive of Accion, a nonprofit financial-services company. “At that time, the division needed good, solid management.”

A news release announcing Lew’s new job said he would “oversee coordination between the operations, technology, human resources, legal, financial and regional departments.” It added that Lew would be a member of Citigroup’s management committee, a group of senior executives who met regularly to discuss the bank’s business.

The division under Lew’s watch was a sprawling group.

A document from May 2007, which may have been prepared for potential clients, lists 14 investment areas, including private equity, real estate, venture capital and infrastructure.

The document said 20 percent of CAI’s capital was Citigroup’s own, totaling $10.8 billion. This meant that CAI was a center for the bank’s proprietary trading, a practice that is, in theory, now banned by the new Volcker rule in the Dodd-Frank bill.

By the time Lew joined in 2008, the hedge funds in the unit were in freefall. The bank began pumping hundreds of millions of dollars into the funds in an effort to keep them afloat.

As investors saw their investments getting wiped out, some began suing the bank, saying they were misled about the level of risk in the investments they bought.

During this time, government agencies also began asking for materials related to the marketing of the investments, according to a Citigroup financial filing for the quarter ending in June 2008.

Lew was “in the loop” on the bank’s damage-control efforts as it tried to contain investors’ concerns over the imploding hedge funds, according to a person familiar with evidence from one of the investor lawsuits against the bank that year. The person spoke on the condition of anonymity because many documents related to the cases are not public.

Separately, the bank’s structured investment vehicles, or SIVs, were generating massive losses for the bank. These pools of investments, which included exotic and risky bets, had been held off the bank’s books and out of the view of regulators.

It is not clear how much oversight Lew exerted over the SIVs.

According to an annual financial filing for 2007, the SIVs were a part of CAI:

“Alternative Investments, through its Global Credit Structures investment center, is the investment manager for seven Structured Investment Vehicles (SIVs),” the filing says.

“To be in the SIVs world at that point in time, that would’ve been in the middle of a financial tornado,” said Williams, the former Fed bank examiner. “I can imagine [Lew] got some gray hair very quickly.”

Yet a critical decision was made before Lew became chief operating officer of CAI: The bank decided to bring the funds onto its balance sheet.

This was a perilous move for the bank. Moving the SIVs onto Citigroup’s balance sheet meant that, just as the bank was hemorraghing money from the mortgage-related losses in its other divisions, it would have to account for massive losses from the SIVs. That would drain still more money from the increasingly vulnerable firm.

Citigroup’s finances continued to nosedive until that fall, when the bank landed in the federal government’s arms. Citigroup received the most assistance of all the banks, between the Treasury’s Troubled Assets Relief Program, the Federal Reserve and the Federal Deposit Insurance Corp.

Lew did not appear to have any role during the negotiations over Citigroup’s bailout. When asked whether they crossed his path at any point in 2008, Henry M. Paulson Jr., former Treasury secretary; Sheila C. Bair, former FDIC chairman; and Robert K. Steel, former undersecretary for domestic finance at the Treasury, all said they had not.

By early 2009, Lew’s brief experience with Wall Street was over. He left Citigroup to become a deputy secretary of state and joined the Obama administration, where he has worked ever since.

“It’s striking the way in which the Obama administration has been staffed by Citigroup expatriates,” said Simon Johnson, a professor at MIT and frequent critic of big banks.

Lew’s supporters say he showed his mettle during the crisis.

“Jack’s time at Citi was during a very tumultuous period with frequent leadership changes at different levels,” said Schlein, Lew’s former Citigroup colleague. “But through all the changes, my recollection is that at both wealth management and alternative investments, Lew was a very smart, talented manager.”