Jacob Lew, President Barack Obama's nominee for Treasury secretary, pledged to work with Congress on a comprehensive overhaul of the tax code while urging lawmakers to avoid automatic spending cuts that could slow the economy's progress.
Jacob Lew, President Barack Obama’s nominee for Treasury secretary, pledged to work with Congress on a comprehensive overhaul of the tax code while urging lawmakers to avoid automatic spending cuts that could slow the economy’s progress.
During a three-hour confirmation hearing Wednesday, Lew fielded a broad range of questions about how he would handle a number of challenging issues, including Europe’s debt crisis, U.S.-China relations and the implementation of the 2010 financial regulatory overhaul.
But the sharpest questions focused on his brief tenure at Citibank, where he was a top executive during the height of the financial crisis. Republicans pressed him about his duties and a nearly $1 million bonus he received when the bank was being bailed out by taxpayers.
Overall, the hearing was mostly friendly with few tense moments. And when it concluded, Sen. Orrin Hatch, the panel’s ranking Republican, said he thought Lew had “done very well.”
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Lew, 57, most recently served as Obama’s chief of staff. He is expected to win Senate confirmation late this month and would succeed Timothy Geithner, who stepped down in January after serving as Treasury secretary during Obama’s first term.
Much of Lew’s testimony reflected the Obama administration’s message. 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 “sensible reforms to Medicare.” And he urged lawmakers to avoid $85 billion in defense and domestic spending that are set to kick in on March 1.
The cuts, Lew said, would impose “self-inflicted wounds to the recovery and put far too many jobs and businesses at risk.”
When asked about tax reform, Lew was upbeat without offering any real details.
He said he would look forward to working with the committee on a rewrite of the tax code and that the way to accomplish it would be to scale back deductions so that tax rates can be lowered.
“But broadening the base means taking on a lot of entrenched interests,” Lew said. “I think we can do it.”
Lew declined to say what current deductions he would recommend scaling back so that tax rates could be lowered.
Several senators wanted to know more about Lew’s three years working for Citi, including a brief period when he was chief operating officer for an investment unit at the bank in 2008. During that time, the bank received the first installment of a $45 billion bailout from the federal government. It has since paid back the money back.
Lew’s unit had been criticized for making risky investments that imploded during the crisis. Lew told the panel that he did not make decisions about investments during that time.
“I was not in the business of making investment decisions,” he said. “I was aware of what was going on, but I wasn’t designing” the investment funds.
Lew left in early 2009 to join the Obama administration. Shortly before his departure, he was paid a $940,000 bonus. Lawmakers wanted to know why he received such a large bonus when the bank was receiving billions in aid from the government.
“I was compensated for my work,” Lew said. “I’ll leave for others to judge.”
Sen. Charles Grassley, R-Iowa, also questioned Lew about an investment of $56,000 he made in an offshore fund registered at a Cayman Islands address. Critics – including Obama – have called the property a tax haven.
Lew sold the investment in 2010 for $54,418, losing money on the investment. He said that he had reported the investment transaction on his tax reforms and had paid all required taxes.
On other issues, Lew:
–Promised to keep pressure on China to allow its currency, the yuan, to rise in value against the dollar. That would make U.S. goods more competitive in Chinese markets. He also said he would pursue other areas where Chinese trade policies are putting U.S. workers and companies at an unfair advantage.
— Defended the 2010 financial overhaul law. But he said the rules must balance the need to prevent another financial crisis with not over-burdening banks with too many regulations.
–Expressed the view that Europe is making good progress in dealing with its debt crisis. But he said further steps would be needed. He said that he had followed the issue closely as Obama’s chief of staff because the president had been deeply involved with Geithner in working with European leaders.