WASHINGTON -- Senate Republicans pressed President Barack Obama’s choice to head the Treasury Department on Wednesday over an investment in a Cayman Islands fund as well as a bonus deal that came as his then-employer Citigroup was about to need a taxpayer bailout and just before he left the bank to return to the government.
Jacob Lew’s confirmation hearing before the Senate Finance Committee lived up to expectations that the longtime Washington insider would face a frosty reception. During more than three hours of questions, Lew sidestepped some of the pointed questions about his brief tenure at banking giant Citigroup.
The questions weren’t likely to derail his expected Senate confirmation. On another matter, Lew said a large-scale overhaul of the tax code could be achieved without raising taxes.
And he offered an olive branch of sort to Republicans by saying he thinks that a large-scale overhaul of the tax code shouldn’t raise taxes.
At the hearing’s start, committee Republicans pummeled Lew over his participation in an investment fund offered by Citigroup that was headquartered in the very Cayman Islands building that President Barack Obama lambasted as a tax sham in 2009.
The ranking Republican, Sen. Orrin Hatch of Utah, grilled Lew on his time at Citigroup from 2006 to 2008 as a managing director and chief operating officer of a wealth-management unit and an alternative-investment unit at the heart of the near-meltdown of the U.S. financial system. Hatch asked Lew whether he’d been copied on emails about the imploding complex bonds that led Citi to be given a nearly half-trillion-dollar taxpayer rescue in late 2008.
Hatch also noted that the unit Lew managed later was accused of betting against the very financial product it sold, like other Wall Street banks. He asked Lew whether he’d done anything to address this “or did you not know about the marketing of the sales products in the unit you managed, in which case I wonder what you did do?”
Lew, until recently the White House chief of staff, largely left Hatch’s four-point question unanswered, noting that “It’s quite a number of years. I don’t recall specific conversations.”
“There was a very bad financial situation,” he added. “Yes, I was aware that there were funds that were in trouble. I didn’t have responsibility for the funds themselves, but I was aware that those difficulties were going on.”
On the issue of investment in a Cayman Islands fund, Lew said he’d invested $56,000 in an international fund offered to employees at Citi and lost money on it. He added that he was unaware it was headquartered in the Cayman Islands, an offshore tax haven that attracted attention during the recent presidential campaign because Republican candidate Mitt Romney’s company had established private-equity investment funds there.
Contacted by McClatchy, Citigroup had no comment Wednesday on the Cayman fund.
The hearing grew notably tenser when Sen. Charles Grassley, R-Iowa, asked Lew whether it was morally acceptable for him to have received a nearly $1 million bonus from Citi a day before the bank was forced to take the huge taxpayer bailout. Lew answered that he was “compensated in a manner consistent with other people” in the financial sector.