The Senate Finance Committee on Tuesday approved President Barack Obama's choice of Jacob Lew to be Treasury secretary and sent the nomination to the full Senate.
The Senate Finance Committee on Tuesday approved President Barack Obama’s choice of Jacob Lew to be Treasury secretary and sent the nomination to the full Senate.
Lew would succeed Timothy Geithner, who completed a tumultuous four-year term in which he helped lead the administration’s response to the financial crisis and recession.
The committee approved Lew’s nomination, 19-5. The timing of a Senate vote is unclear.
During a three-hour confirmation hearing Feb. 13, the sharpest questions came from Republicans who pressed Lew about his tenure at Citigroup, where he was a top executive from 2006 until early 2009, a period covering the height of the financial crisis. Lew was grilled about a nearly $1 million bonus he received while Citi was being bailed out by taxpayers.
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Lew, 57, most recently was Obama’s chief of staff. He earlier served as Obama’s budget director, a post he also held during the Clinton administration. Lew began his government service in the 1980s as an aide to House Speaker Tip O’Neill.
During his confirmation hearing, Lew signaled no major economic policy changes. He advocated a balanced approach to reducing the long-term budget deficit through spending cuts and additional tax revenue.
He said he would be open to reforms to Medicare, but he didn’t spell out any details. Lew also said he would work with the committee on a rewrite of the tax code. He said tax simplification could be achieved by reducing deductions so rates could be lowered. But he said this would mean taking on “a lot of entrenched interests” who will defend current tax deductions.
Several senators pressed Lew to explain the period when he worked at Citi, including a time when he was chief operating officer for an investment unit in 2008. Lew’s unit has been criticized for making risky investments that imploded during the crisis. Lew told the panel that he didn’t make decisions about the investments being offered to clients.
While Lew was at Citi, the bank received the first installments of a $45 billion bailout, support that has since been repaid. Lew was paid a $940,000 bonus in early 2009.
Asked about the propriety of such a large bonus at a time when the bank was being bailed out, Lew told the committee that he was compensated for his work and he would leave it to others to judge.
If he is confirmed by the Senate, Lew would be the first Treasury secretary to take the job after being a president’s chief of staff since James A. Baker III served as Ronald Reagan’s chief of staff before becoming Treasury secretary in 1985.
Beyond the budget, Lew is expected to hew closely to the positions Geithner struck on such issues as Europe’s debt crisis, the U.S. relationship with China and the administration’s defense of the Dodd-Frank financial overhaul law that the banking industry has fought to weaken.
One potential weakness for Lew: His relative inexperience with financial markets and international economic crises – areas that had played to Geithner’s background. Analysts think Lew will keep pressuring Europe to deal aggressively with its budget and debt issues. But they think this will consume less of his time given that Europe’s debt crisis now poses less of a threat to the global economy.
On trade, Lew is expected to keep prodding China. The U.S. trade gap with the world’s second-largest economy hit another record high last year. No breakthrough is expected, though.
Lew will also need to calm investors who have grown concerned about possible currency wars after Japan’s new government sought to lower the value of the yen as a way to boost exports and its weak economy. A weaker yen makes Japanese goods cheaper overseas and foreign goods costlier in Japan.
And Lew will need to defend the Dodd-Frank Act, which overhauled financial regulation after the 2008 crisis. Since the law was passed in 2010, Wall Street has fought to weaken many of its stricter regulations.