Treasury Nominee Lew Looks on Track for Confirmation After Hearing
Jacob J. Lew emerged relatively unscathed from his nomination hearing to serve as Treasury secretary, putting the administration’s choice to replace Timothy F. Geithner on a likely easy path to confirmation.
Senate Finance Chairman Max Baucus, D-Mont., told reporters after the hearing that he would schedule a vote on the nomination after the Senate returned from next week’s recess. Sen. Orrin G. Hatch of Utah, the panel’s top Republican, said he had not decided whether to support Lew, but suggested he would not hold up the nomination on the Senate floor if approved by the panel as expected.
Despite sharp criticism of Obama administration economic policies and attacks on Lew’s personal investments, Lew’s public hearing was a marked contrast with the contentious battles other nominees have faced in recent weeks.
“Frankly, I think you’ve done really well today,” Hatch told Lew at the end of the three-hour hearing.
At the urging of lawmakers on both sides of the aisle, the White House chief of staff pledged his support Wednesday for a tax code overhaul, saying it was an “extremely important priority.”
Lew said he hoped to broaden the tax base while lowering rates, something many Republicans have said should be a major priority. But he also said additional revenue was needed to help reduce the deficit, which GOP lawmakers have resisted.
Lew said an overhaul of both the individual and business tax codes should be undertaken simultaneously. And although he said a corporate tax re-write could be done in a revenue-neutral way, he said lowering the top corporate rate to 25 percent from the current 35 percent, as some lawmakers want, would be challenging.
Several Republicans raised concern about Lew’s background in the financial industry and past investments that GOP senators said contrast with President Barack Obama’s criticism of offshore investments.
“We know very little about your knowledge of the activities and practices of the units for which you were the chief operating officer,” said Hatch, who asked Lew to explain his role at Citigroup and what knowledge he had of the firm’s activities that led to its near-collapse during the 2008 financial crisis.
Lew said he was tasked with overseeing a wide range of business activities but was not responsible for risky trades.
“I learned a great deal about the financial products, but I wasn’t designing them,” Lew said. “I take away a deep understanding there are risks that we need to be very much on guard against.”
Sen. Charles E. Grassley, R-Iowa, asked whether it was “morally acceptable” to take a huge bonus even as the firm was drawing on a federal bailout that ultimately totaled $45 billion.
Lew countered he was in the private sector at the time and was simply accepting the compensation that was standard in the industry.
Grassley also hit Lew for an investment he held from 2007 to 2010 in a venture capital fund based at a site in the Cayman Islands. Obama repeatedly criticized GOP nominee Mitt Romney for his offshore investments during the 2012 campaign.
“There’s a certain hypocrisy in what the president says about other taxpayers and, then, your appointment,” Grassley said.
Lew told the committee he was not aware at the outset that the investment, which he made as a Citi employee, was located in the Cayman Islands. He also said he always paid taxes on it and divested in 2010 when he became Obama’s budget director.
Seizing on an attack previously made by Sen. Jeff Sessions, R-Ala., Senate Minority Whip John Cornyn, R-Texas, rebuked Lew and the administration for not sending Congress a Medicare spending control plan as required by the 2003 Medicare prescription drug benefit law (PL 108-173). Both the Obama and George W. Bush administrations determined Congress could not mandate such a proposal, although the Bush administration voluntarily provided the mandated report on Medicare.
Lew told Cornyn that the administration had already made the decision not to submit the report before he became budget director.
Referring to the recent legislation that threatened to delay lawmakers’ salaries absent adoption of a budget, Cornyn suggested it might be appropriate to withhold OMB pay until it complied with the Medicare law.
Several Democrats pressed Lew, who lacks deep background in financial policy, if he was prepared to carry out implementation of the Dodd-Frank law. He promised to make his leadership of the Financial Stability Oversight Council, which comes with the position of Treasury secretary, an “extraordinarily high priority of mine.”
Others urged Lew to go beyond the law. Sen. Maria Cantwell, D-Wash., asked Lew if he would support re-establishing the 1930s-era Glass-Steagall Act, which split commercial and investment banks and was repealed under President Bill Clinton.
Lew called the measure “something of an anachronism” but later signaled a willingness to consider new rules.
“I think that the question of is there a need for any further consideration of financial regulation is one that just comes in sequence after implementing Dodd-Frank,” Lew said. “And I come to the issue open-minded, knowing that we can’t let what happened leading up to 2008 happen again.”
That reflected an approach that Lew took across a broad range of economic policy questions from taxation to regulatory policy, issues Lew said he looked forward to working on with the committee.
Democrats Sherrod Brown of Ohio and Bob Casey of Pennsylvania urged Lew to reverse years of U.S. policy and designate China a formal currency manipulator. Lew, however, stuck to the script, which is that the administration was making progress through diplomatic pressure.
“I would put a lot of energy behind developing a relationship where I could push back on practices in China that we think are unfair,” Lew said. “We have done that as an administration. We will continue to do that.”