Republicans are voicing new concerns about the Obama administration’s pick for treasury secretary, questioning both Jacob Lew’s lucrative 2001 contract with New York University and whether he had anything to do with his subsequent employer Citigroup’s winning a lucrative preferred-lender deal to provide loans to students.
Leading the charge is Sen. Charles Grassley, R-Iowa, who this week pressed for more disclosure about a mortgage deal granted by NYU to Lew. Grassley also released the treasury nominee’s written responses to questions about his time as executive vice president at the university after leaving the Clinton administration, and Friday he demanded more.
“If the past is a predictor of future behavior, I worry about having a treasury secretary already claiming poor recall of financial dealings,” Grassley said in a statement to McClatchy.
Grassley, a senior member of the Senate Finance Committee, which must confirm Lew, is particularly interested in how Citigroup won preferred-lender status at the school and whether Lew was in any way involved.
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“I do not recall having any conversations with Citigroup officials regarding Citigroup’s selection or actions as a preferred lender for NYU students. Also I do not believe that I approved the selection of Citigroup as a preferred lender for NYU students,” Lew said in written responses to Grassley, adding that the financial aid division didn’t report to him.
In exchange for the preferred-lender status, Citi gave NYU about 0.25 percent of the value of the student loans. Grassley called that a kickback. Lew responded that the money went to needy students. Andrew Cuomo, who was then New York’s attorney general, investigated preferred-lender agreements and reached a 2007 settlement with Citi and others. By that date, Lew had left NYU and took a job heading wealth management at Citi, a division that Lew told Grassley had nothing to do with student loans.
The White House hit back at Grassley’s claims.
“Jack Lew has been fully responsive to this committee to an unprecedented degree, providing written responses to 444 questions over the last five days,” White House spokesman Eric Schultz said in a statement. “This follows three separate rounds of questions answered prior to his hearing, a 3.5 hour confirmation hearing and his participation in personal one-on-one meetings with 41 senators over the course of two weeks.”
There’s no sign that Lew’s nomination is in jeopardy, nor evidence of criminal wrongdoing. But Lew’s departure from, and return to, government illustrated a revolving door between Washington and Wall Street, where Democrats and Republicans alike land cushy private-sector jobs. Critics contend this culture allows Wall Street to cash in on connections and in the case of employees who return to government, a friend in high places who at worst can hear them out.
“We’re concerned that a person who will be overseeing Wall Street chose to go to Wall Street for apparently the same reason that Wall Street is such a danger to the economy,” said Bart Naylor, financial policy advocate for the watchdog group Public Citizen. “It’s a place where one can make a lot of money in a short amount of time.”
Said Grassley, “Mr. Lew was very good at getting paid by taxpayer-supported institutions, Citigroup with its taxpayer-funded bailout, given on his way out, and tax-exempt New York University. His willingness to accept seemingly every bonus, severance payment, and perk available to him raises questions about whether he appreciates who pays the bills.”
At Citi, Lew was an executive in two divisions from 2006 to 2008. He enjoyed the very perks often criticized by lawmakers and the president, including a nearly $1 million bonus in 2008 granted a day before the taxpayer rescue of Citi.
Lew, who had a base salary at Citi of $350,000, did not face the same kind of grilling over Wall Street ties during his three previous administration posts, which included a top job at the State Department in 2009, White House budget director in 2010 and White House chief of staff in 2012. In those jobs he didn’t have oversight of Wall Street activities. As treasury secretary, he’d head an interagency panel whose mission is to determine if big banks such as Citi pose a threat to the financial system.
During his Feb. 13 confirmation hearing before the Senate Finance Committee, Lew fended off questions about a personal investment in a fund based in the very building President Barack Obama had slammed as a “tax sham” in 2009. Lew defended his bonus as in line with how others in the financial sector were compensated, and he said he’d leave it to others to judge whether it was merited. He also stressed he was an administrator who did not make decisions on the financial bets in his own division that almost brought down the global financial system.
The watchdog group Public Citizen on Friday questioned the legality of Lew’s bonus. During the confirmation hearing, Lew was asked by Sen. Orrin Hatch, R-Utah, how he was able to keep the $940,000 bonus, since many such payments have “claw back” provisions if an executive leaves. Lew’s contract, parts of which were obtained and put online Friday by Bloomberg columnist Jonathan Weil, allowed him to keep the bonus if he left for a high-level government job.
“It’s troubling that they would put such phrasing in there. If you get a part-time or low-level job, you don’t get your million dollars,” said Naylor. He said a more “malignant” reading of the contract is “that they are buying the loyalty of an exiting employee because of the high-level United States government job.”
In response to other questions from Grassley, Lew did not challenge that he earned more as executive vice president of NYU than the president of the university or its dean. He received about $440,000 in housing assistance over the five-year period and also received a $1.4 million shared appreciation mortgage, where the school and Lew split any profits.
“I do not recall the interest rate or other specific terms,” Lew wrote about that loan, adding that he declared all assistance on tax forms and that “I paid all taxes that were due.”
“So far, Mr. Lew has said he can’t recall almost all the details of the mortgage, including the rate,” Grassley said in a statement to McClatchy. “For the Senate to make an informed judgment, we need these materials.”