By Pam Martens: February 28, 2013
The Obama administration pushed through the full Senate vote on the nomination of Jack Lew for Secretary of the Treasury late yesterday afternoon, just one day after the Senate Finance Committee voted to confirm the nomination. One suspects the rush was to prevent further details of Lew’s lavish pay packages, loans and other perks at his previous employers, New York University and bailed out bank, Citigroup, from gaining traction in the press.
But rest assured, this is no win for the President’s legacy or his party. The Democrats’ progressive base was just as adamant against Lew for U.S. Treasury Secretary as were most Republicans who took a careful look at Lew’s history.
Robert Scheer, writing at The Nation Magazine said:
“I suppose that he can’t be much worse than Timothy Geithner, but that should be scant cause for cheer over the news that the president has nominated Jack Lew as Treasury secretary. Both championed the financial deregulation craze of the Clinton administration, and both are acolytes of Robert Rubin, the former Clinton Treasury secretary who unfettered Wall Street greed and then took his own considerable cut of the action.
“Rubin went to work at Citigroup, the world’s largest financial conglomerate whose legality was enabled by legislation he advanced while in government. He made off with a salary of $15 million a year during his decade at that bank, which specialized in toxic mortgage derivatives and had to be bailed out by taxpayers to avoid bankruptcy.”
Lew also cashed in his chips at Citigroup, taking a job there from 2006 through early 2009 that paid him millions, including a $940,000 bonus in early 2009 that was paid with bailout funds from the U.S. taxpayer after the company became insolvent from soured mortgage bets. Lew served as Chief Operating Officer of the very division that the SEC charged with hiding $39 billion of subprime debt off its balance sheet in Structured Investment Vehicles (SIVs).
But that bonus was hardly the end of Lew’s problems. He invested in a fund in the Cayman Islands at the very street address that the President had called a tax scam. He received a $1.4 million loan from endowment funds at New York University, a taxpayer subsidized nonprofit, to buy a lavish home in the Riverdale section of the Bronx; he accepted forgiveness of large amounts of the loan and a reimbursement of the interest charged on the loan from the University.
After negotiating a lush pay package to move to Citigroup, he somehow got a $685,000 “severance” payment from NYU. And, worst of all, when repeatedly asked in writing to explain the details of these transactions, he stonewalled the Senate Finance Committee. I’m not taking the word of Republican Senators on this; I did my own investigation and Lew was a master of intentional obfuscation, leading to the obvious question, what else is he hiding.
From the editorial page of the Wall Street Journal, to the National Review, to liberal media like Democracy Now! and Rolling Stone, and this web site’s exhaustive reporting, Lew was ruled unfit to serve as U.S. Treasury Secretary by anyone who took a serious look at his mountain of specious deals.
A last valiant attempt was made on the Senate Floor yesterday by Independent Senator Bernie Sanders of Vermont and Republican Senator Chuck Grassley of Iowa to stop this national disgrace. The sincerity of the due diligence each conducted on this nominee and the courage and patriotism of their remarks on the Senate floor warrant their full statements being reprinted here. If you are a Democrat, you owe it to yourself to read these statements to comprehend how all of your hard work in electing this President and holding on to a majority in the Senate is now being repaid with a slap in your face. If you are just an average citizen from a different party who loves your country and fears for its future, you also owe it to yourself and your children and grandchildren to read these statements and understand the arrogance and unaccountability of this administration.
At one point during the daylong Senate proceeding, Jeff Sessions, Republican Senator from Alabama, pleaded for his colleagues to “defend the integrity of the Senate.” But integrity and truth miserably failed the test in the Senate yesterday. Lew was confirmed with a vote of 71 to 26, with 20 Republicans joining the cowardly Democrats.
Senate Floor Statement by Senator Bernie Sanders Prior to Senate Vote on the Confirmation of Jacob Lew to be Treasury Secretary: February 27, 2013
Mr. President, I rise today in opposition to the nomination of Jack Lew to be the next Treasury Secretary. I’ve had the opportunity to speak with Mr. Lew in my office on several occasions. I believe that Mr. Lew is an extremely intelligent person and I applaud his many years of public service to our country. I believe that he will be confirmed by the Senate. Unfortunately, he will be confirmed without my vote.
It is no secret to anyone that the United States today finds itself in one of the worst economic situations since the Great Depression. The bottom line is that the middle class is collapsing, poverty is extremely high with 46.2 million Americans living in poverty, while the gap between the very, very wealthy and everyone else grows wider and wider.
Mr. President, we need a Treasury secretary who will stand with the working families of this country and is prepared to take on an oligarchy which now controls the economic and political life of this great nation.
Is Jack Lew that person? No, he is not.
Mr. President, this is the economic reality that we are confronting today. We have the most unequal distribution of wealth and income of any major country on earth. Today, the wealthiest 400 individuals in this country own more wealth than the bottom half of America — 150 million people. Today, one family, the Walton family of Wal-Mart, owns more wealth than the bottom 40 percent. Today, the top 1 percent owns 38 percent of all financial wealth, while the bottom sixty percent owns less than 3 percent of all wealth. Today, as Warren Buffett has pointed out, the 400 richest Americans are now worth a record-breaking $1.7 trillion – more than five times what they were worth just two decades ago.
And while the rich are getting even richer, the Federal Reserve reported last year that median net worth for middle class families dropped by nearly 40 percent from 2007-2010. That’s the equivalent of wiping out 18 years of savings for the average middle class family.
As bad as wealth inequality is, the distribution of income is even worse. If you can believe it, the last study on this subject showed that from 2009 through 2011, 100 percent of all new income went to the top one percent, while the bottom 99 percent actually saw a loss in their income.
Unfortunately, this is not a recent trend. In fact, from 1969 to 2009, median earnings for male high school graduates plummeted by almost 50 percent after adjusting for inflation. Men without a high school education have fared even worse: their inflation-adjusted median earnings have shrunk by nearly two-thirds over the past four decades.
Overall, average middle class families have seen their income go down by nearly $5,000 since 1999, after adjusting for inflation. Today, 14.4 percent of Americans – nearly 23 million people – are unemployed or under-employed.
Small businesses are still struggling to get the affordable loans they need to stay alive. Millions of Americans are still underwater on their mortgages and millions more have seen the American dream of homeownership turn into the American nightmare of foreclosure.
Mr. President, the next Treasury secretary will face enormous challenges. Let me give you a few examples of what I mean. The next Treasury Secretary will play a central role in regulating and overseeing Wall Street and large financial firms. Let us never forget: as a result of the greed, recklessness, and illegal behavior on Wall Street, millions of Americans lost their jobs, homes, life savings, and ability to send their kids to college.
We need a secretary of the Treasury who does not come from Wall Street, but is prepared to stand up to the enormous power of Wall Street. We need a Treasury secretary who will end the current Wall Street business model of operating the largest gambling casino the world has ever seen and demand that Wall Street start investing in the job creating productive economy. Do I believe that Jack Lew is that person? No, I do not.
The decisions made by the next Treasury secretary will determine whether financial institutions need another taxpayer bailout or do not. In my view, we need a Treasury secretary who will work hard to break up too-big-to-fail financial institutions so that Wall Street cannot cause another massive financial crisis. Do I believe Jack Lew will work to break-up large financial institutions? No, I do not.
In 2008, against my strong opposition, the taxpayers of this country provided huge financial institutions with the largest bailout in the history of the world because, we were told, they were too big to fail. The Treasury Department provided $700 billion in financial assistance to the largest banks in this country, and the Federal Reserve provided over $16 trillion in virtually zero interest loans to these same financial institutions.
What is the state of our financial system today? Today, the 10 largest banks in America are bigger than they were before the financial crisis began. Today, the six largest financial institutions in this country (J.P. Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and MetLife) have assets equal to two-thirds of the Gross Domestic Product of this country – over $9.6 trillion. Today, six financial institutions (JP Morgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley) issue two-thirds of all credit cards, half of all mortgages, control 95 percent of all derivatives, and hold nearly 40 percent of all bank deposits in this country.
While millions of Americans continue to struggle through the worst economic crisis since the 1930s, Wall Street is doing phenomenally well. Financial institutions made over $143 billion in profits in 2012 – the most profitable year on record with the exception of 2006, just before the economic meltdown. Incredibly, the financial industry now makes almost half of all non-farm corporate profits in the United States, up from just about 10 percent in 1947.
As someone who supports President Obama, I remain extremely concerned that virtually all of his key economic advisers have come from Wall Street. And let me be clear. It’s not just because Mr. Lew served as a Chief Operating Officer at Citigroup during the financial crisis. It’s not just because Citigroup awarded Mr. Lew a $940,000 bonus as he was leaving to join the State Department in 2009. It’s not just because Citigroup received a total of $2.5 trillion in virtually zero interest loans from the Federal Reserve or that the Treasury Department provided Citigroup with a bailout of more than $45 billion, during Mr. Lew’s tenure at Citigroup. I am opposed to Mr. Lew’s nomination because of the views he now holds about Wall Street and the financial system.
On September 22, 2010, when I asked Mr. Lew at a Budget Committee hearing if he believed that the deregulation of Wall Street significantly caused the financial crisis, here is what he said: “I don’t believe that deregulation was the proximate cause. I would defer to others who are more expert about the industry to parse it better than that.” At his confirmation hearing earlier this month, Mr. Lew called the Glass-Steagall Act “anachronistic” and said that the Dodd-Frank Act had “effectively” dealt with the issue of banks that are too big to fail. I strongly disagree.
Mr. President, in my view, we don’t need another Treasury secretary who thinks that the deregulation of Wall Street did not significantly contribute to the financial crisis. We need someone who will stand up to these large financial institutions and say enough is enough! Do I think that Mr. Lew is that person? No, I do not.
Importantly, Mr. President, not all former Wall Street executives think like Jack Lew. On July 24, 2012, the former CEO of Citigroup Sanford Weill told CNBC: “What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans and have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail.” Mr. President, if an institution is too big to fail, it is too big to exist. That’s what we need to hear from our next Treasury Secretary. Unfortunately, that is not what we are hearing from Mr. Lew.
Mr. President, the next Treasury Secretary will be the lead negotiator for the President on how to reduce the deficit. Here’s the issue: Do we demand that the most profitable corporations and the wealthiest Americans in this country significantly contribute to deficit reduction? Or, do we balance the budget on the backs of the elderly, the sick, the children, and the most vulnerable by cutting Social Security, Medicare and other vitally important programs for the middle class.
I strongly believe that we need to reduce the deficit by asking the most profitable corporations and the wealthiest people in this country to pay their fair share in taxes. Large corporations and the wealthy are avoiding more than $100 billion in taxes each and every year by setting up offshore tax shelters in places like the Cayman Islands, Bermuda and the Bahamas. Offshore tax schemes have become so absurd that one five-story office building in the Cayman Islands is now the “home” to more than 18,000 corporations.
Let me give you a few examples: In 2010, Bank of America set up more than 200 subsidiaries in the Cayman Islands (which has a corporate tax rate of 0.0 percent) to avoid paying U.S. taxes. It worked. Not only did Bank of America pay nothing in federal income taxes, but it received a rebate from the IRS worth $1.9 billion that year. They are not alone.
In 2010, JP Morgan Chase operated 83 subsidiaries incorporated in offshore tax havens to avoid paying some $4.9 billion in U.S. taxes. That same year Goldman Sachs operated 39 subsidiaries in offshore tax havens to avoid an estimated $3.3 billion in U.S. taxes.
Citigroup has paid no federal income taxes for the last four years after establishing 25 subsidiaries in offshore tax havens. On and on it goes. Wall Street banks and large companies love America when they need corporate welfare. But when it comes to paying American taxes, they want nothing to do with this country. That has got to change.
Do I believe that Mr. Lew will aggressively crack down on offshore tax havens as Treasury Secretary and help us bring in the substantial revenue that we need to reduce the deficit and create jobs? No, I do not.
Unfortunately, Mr. President, Jack Lew told the Senate Budget Committee in 2010 that he supports “deficit neutral” corporate tax reform. I couldn’t disagree more. Today corporate profits are at an all-time high, while corporate income tax revenue as a percentage of GDP is near a record low. In 2011, corporations paid just 12 percent of their profits in taxes, the lowest since 1972. In 2005, one out of four large corporations paid no income taxes at all even though they collected $1.1 trillion in revenue over that one-year period.
In my view, we need a Treasury secretary willing to fight to make sure that large, profitable corporations pay their fair share in taxes to reduce the deficit and create jobs. Is Mr. Lew going to be that person? I don’t think so.
The next Treasury secretary will also play an enormous role on the future of Social Security and Medicare. On these issues, the American people have been clear: do not cut Social Security or Medicare benefits.
According to a February 25th, 2013, poll commissioned by The Hill, 62 percent of Republicans and 82 percent of Democrats are opposed to cutting Medicare and Social Security benefits to reduce the deficit.
In my view, we need a Treasury Secretary who will stand up to Republicans and some Democrats in Washington and tell them no, we will not cut Social Security or Medicare benefits. In fact, we need a Treasury Secretary who has the courage to say that to the President as well. Do I believe that Mr. Lew is that person? No, I do not.
Mr. President, the next Treasury Secretary will also play an important role in developing our trade policy. Let’s be clear: our current unfettered free trade policy has been an absolute disaster. Last year, our trade deficit was more than $540 billion. Permanent Normal Trade Relations with China has led to the loss of nearly 3 million American jobs; and the North American Free Trade Agreement has led to the loss of nearly 1 million American jobs as large, multi-national corporations continue to throw American workers out on the street and move to China, Mexico and other low wage countries.
In 2008, I supported then-Senator Obama when he told the AFL-CIO in Philadelphia the following: “What I refuse to accept is that we have to sign trade deals like the South Korea Agreement that are bad for American workers. What I oppose — and what I have always opposed — are trade deals that put the interests of multinational corporations ahead of the interests of Americans workers — like NAFTA, and CAFTA, and permanent normal trade relations with China. And I’ll also oppose the Colombia Free Trade Agreement if President Bush insists on sending it to Congress because the violence against unions in Colombia would make a mockery of the very labor protections that we have insisted be included in these kinds of agreements. So you can trust me when I say that whatever trade deals we negotiate when I’m President will be good for American workers, and that they’ll have strong labor and environmental protections that we’ll enforce.”
Unfortunately, as President, Barack Obama signed those bad trade deals into law while Mr. Lew was the Director of the Office of Management and Budget. As a result, more American jobs have been lost and our trade deficits with all of those countries have gone up.
In my view, we need a Treasury secretary who will work to fundamentally re-write our trade policies to ensure that American jobs are no longer our number one export. Do I believe that Mr. Lew is that person? No, I do not.
Mr. President, the next Treasury secretary will face enormous challenges to get this economy back on track, to reform Wall Street, to shrink our growing trade deficit, to reduce the enormous income and wealth inequality in this country, and to put millions of Americans back to work.
After meeting with Mr. Lew in my office, after hearing his views in the Budget Committee, and after reviewing his record, I have come to the conclusion that Mr. Lew is not the right person to lead the Treasury Department at this time.
Senate Floor Statement of Senator Chuck Grassley Before Senate Vote on Jack Lew Confirmation for Treasury Secretary: February 27, 2013
Mr. President, the problem we face with Mr. Lew’s nomination is that the Senate does not have answers to basic factual questions about Mr. Lew. How can we make an informed choice on his nomination?
For example, when Mr. Lew worked at tax-exempt New York University, he was given a subsidized $1.4 million mortgage. Now, Mr. Lew claims that he cannot remember the interest rate he paid on his $1.4 million mortgage that tax-exempt New York University gave him. Does this pass the laugh test?
I asked Mr. Lew to provide details of the mortgage to Congress. He refused repeated requests for full details and documentation of this taxpayer-subsidized mortgage. The explanations he did provide were needlessly complex, making it almost impossible to understand the structure of his loan. What is he hiding? Why can’t Congress get a straight answer out of him?
When Mr. Lew was executive vice president of NYU, the school received kickbacks on student loans from Citigroup. Then, Mr. Lew went to work for Citigroup. When I asked Mr. Lew if he had any conversations with Citigroup about these kickbacks while he was at NYU, he once again “could not recall.” I asked for any documents related to his involvement in the kickbacks. He refused to search for them. Did those conversations occur? We don’t know.
On Monday, The New York Times uncovered a $685,000 payment NYU gave Jack Lew on his way out the door. The New York Times called the payment “unusual.” It’s a shame that Mr. Lew failed to provide these details as part of his confirmation process, leaving us to rely on the press to dig out the details. He told the Finance Committee that he received “severance pay” from NYU but did not disclose the amount.
The dictionary defines “severance pay” as, “A sum of money usually based on length of employment for which an employee is eligible upon termination.” Was Mr. Lew terminated? If so, why was he terminated? If not, was the severance package really a parting gift from the university? I don’t know the answers to those questions, because Mr. Lew was not forthcoming with answers.
When it comes to questions about investments in the Cayman Islands, things get even less transparent. Mr. Lew claims he did not know that Ugland House was a notorious tax haven. He claims he did not know that he had his money in the Cayman Islands. He claims he was not aware of any Citigroup Cayman Islands accounts. Again, it doesn’t pass the laugh test.
President Obama and Chairman Baucus had highlighted Ugland House as a problem. When Mr. Lew was at Citigroup, for years, he signed documents that disclosed the fact that he was investing money in the Cayman Islands. His distinctive signature was just inches away from the words “Ugland House,” “Grand Cayman” and “Cayman Islands.” He claims now that he did not know where his money was going.
We have so many more questions for Mr. Lew. As the Wall Street Journal said last week in reference to Mr. Lew’s past: “Investor in a Cayman Islands tax haven? Check. Recipient of a bonus and corporate jet rides underwritten by taxpayers at a bailed-out bank? Check. Executive at a university that accepted student-loan ‘kickbacks’ for steering kids toward a favored bank? Check. Excessive compensation with minimal disclosure? Check.”
Mr. Lew’s eagerness and skill in obtaining bonuses, severance payments, housing allowances and other perks raises concerns about whether he appreciates who pays the bills. How will he approach the burden on taxpayers to pay the government’s bills? Will he act as cavalierly toward the taxpayers as Treasury secretary as he did at Citigroup and New York University?
But despite all these questions, we are rushing to vote on his nomination. Clearly, these questions don’t matter to Mr. Lew’s supporters because they’re confident they have the votes, unfortunately with assistance from our side.
But transparency and sunlight are essential for Congress and for the American people. Those supporting Mr. Lew today better not expect any real answers out of him in the future. If Mr. Lew will not answer our questions now, why should we expect him to answer any questions if he is confirmed?
The larger problem, though, may be that when Mr. Lew actually does try to answer a question he confirms our concerns. For example, when Mr. Lew was caught with a Caymans Island bank account he said, well, “I didn’t make any money.”
Apparently there is now a new standard. It’s okay to invest in “the largest tax scam in the world.”
Those are the President’s words, not mine. It’s okay, so long as you don’t make money. When Mr. Lew was asked about NYU’s investments in the Cayman Islands investments, again, he could not recall them.
Mr. Lew received over $1.2 million in his final year at NYU. He was hired specifically to run the business side of NYU. And despite all this, he claims he had no specific knowledge of where NYU’s money was being invested.
When I asked Mr. Lew if he could explain, morally, his decision to take almost a million dollars from an insolvent company supported by taxpayers he could not answer. He said only, “I leave it for others to judge.”
Mr. Lew refused to explain why he thought the bonus was justified. Since Mr. Lew could not answer that question, today, we must answer it. It is important that we hold members of this Administration equal to the standard that they set for everyone else.
In the past, the President has railed again the “fat cats” on Wall Street. Today, the President nominates a man who took a bonus from a bailed-out financially insolvent bank.
The President has constantly complained about the high cost of college tuition. While Mr. Lew was at NYU, the University increased tuition nearly 40 percent while he was getting paid more than NYU’s President.
In the not so distant past, President Obama called the Ugland House “the biggest tax scam in the world.” Today he nominates a man who invested there. In fact, the President has repeatedly railed against the Cayman Islands and Cayman Islands investments. Mr. Lew is a serial Cayman Islands investor. On his watch, Citigroup invested money there, NYU invested money there, and he invested his own money there.
I believe it is essential to hold everyone to the same standard they set for others. For these reasons I will vote no on this nomination.