Bill Black: Jacob Lew: Another Brick in the Wall Street on the Potomac

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from huffpost:



William K. Black
Assoc. Professor, Univ. of Missouri, Kansas City; Sr. regulator during S&L debacle

Jacob Lew: Another Brick in the Wall Street on the Potomac


The New York Times has just run two articles confirming that President Obama intends to appoint Jacob Lew as Treasury Secretary Geithner's replacement. Most people assume that Geithner is a creature of Wall Street through direct employment, but Geithner never drew a paycheck directly from Wall Street. Geithner worked for a wholly-controlled subsidiary of Wall Street -- the Federal Reserve Bank of New York. Lew is the real deal, another brick in Obama's creation of Wall Street on the Potomac. While the first NYT article ignored Lew's work on Wall Street, the second article simply tries to minimize it.

Mr. Lew had a brief turn in the financial industry before joining the Obama administration four years ago, working at the financial giant Citicorp, first as managing director of Citi Global Wealth Management and then as chief operating officer of Citigroup Alternative Investments.

"Global Wealth Management" refers to banking services for the wealthiest people in the world, a club in which mere millionaires are barely worth having as a client. "Alternative investments" refers to financial derivatives traded for the bank's own account. Lew's training was as a lawyer. From CBS News:

Obama is clearly comfortable bringing another ex-Wall Streeter into an administration that, beyond a recent ratcheting up of populist rhetoric, has done relatively little to rein in the financial industry.

That, in turn, reflects the ease with which Washington hands like Lew shuttle between the Street and the Hill. Case in point: Lew's predecessor as budget chief, Peter Orszag, left the agency and joined Citi as vice chairman of global banking. A job in politics is no longer a back-door to a lucrative job in banking -- it's a red carpet. The revolving door keeps spinning.

The Citi (alternative investments) division ultimately lost billions. As for Lew, he naturally made big bucks during his three-year stint at Citi, including a roughly $950,000 bonus in 2009 -- after the company's federal bailout.

Lew helped establish finance policy under President Clinton.

Lew served as OMB chief from May 1998 to January 2001 during the Clinton administration, when Clinton signed into law the Financial Services Modernization Act of 1999 and the Commodity Futures Modernization Act of 2000 -- two pieces of legislation at the heart of the deregulation of Wall Street. The first repealed the law that had long kept commercial banks from offering products or engaging in services more common with investment banks; the second "eliminated virtually all regulation" over the kind of derivatives that trade outside regulators' view....

Lew's predecessor as chief of staff was William Daley. Daley is a lawyer. Daley was on the executive board of J.P. Morgan-Chase during the crisis and before that he was on Fannie Mae's board of directors. Daley is a member of "Third Way's" controlling board. Third Way is a Pete Peterson ally that lobbies in favor of austerity and cuts to the safety net. It pushes Wall Street's, and Pete Peterson's, greatest dream -- privatizing Social Security. Privatization would allow Wall Street to increase its profits by hundreds of billions of dollars in fees for managing our retirement savings. .......................(more)

The complete piece is at: http://www.huffingtonpost.com/william-k-black/jacob-lew-another-brick-i_b_2446848.html