Though He Lacks the Classic Resume, Lew Will Likely Be Popular Choice to Head Treasury
Although White House Chief of Staff Jacob J. Lew has relatively little experience dealing with the financial industry, that may not matter all that much if, as widely reported, President Barack Obama intends to nominate him on Thursday to be the next Treasury secretary.
Outgoing Secretary Timothy F. Geithner, like most of his recent predecessors, brought to the job deep familiarity with financial markets. But with budget negotiations — rather than responding to financial crises or crafting new banking laws — the order of the day for the next Treasury head, many on and off Wall Street view Lew as a sound choice.
“The focus is the federal debt and the nation’s fiscal issues,” said Isaac Boltansky, an analyst at the financial services firm Compass Point Research & Trading. “The environment calls for a different type of Treasury secretary.”
That point of view is not unanimous. “His lack of deep knowledge of the financial markets is a concern,” said one financial industry lobbyist.
Lew, who got his current job a year ago after serving as Office of Management and Budget director for Obama, is widely expected to be nominated soon. Geithner has signaled an intention to step down by the end of this month.
Boltansky said his clients and colleagues are unconcerned that Lew, a Clinton administration veteran and former House staffer, is not steeped in the minutia of the financial world. “It is not a primary concern of the financial market participants that we speak to largely because the overarching concern of 2013 is budgetary and fiscal policy, and his bona fides in those departments are well known,” Boltansky said.
A Georgetown University-trained lawyer, Lew first made a name for himself as domestic policy adviser to former House Speaker Thomas P. “Tip” O’Neill from 1979 through 1986. In the Clinton White House, he helped negotiate the 1997 bipartisan agreement that led to a balanced budget and served a first stint as budget director from 1998 to 2001.
Lew began the Obama administration as deputy secretary of State for management and resources, before becoming OMB director in November 2010. He has been one of Obama’s chief budget negotiators with congressional Republicans and has the reputation of a thoughtful but fierce defender of social safety net programs.
Lew does have Wall Street on his resume. He worked for Citigroup from 2006 until joining the Obama administration in 2009, but his jobs — including chief operating officer for Citigroup Alternative Investments — involved balancing the books rather than making trades. But some liberal lawmakers reviewing his expected nomination may point out that the unit he helped lead engaged in the kinds of lucrative but risky trading that critics say fueled the 2008 financial crisis.
Lew’s professional experience with finance pales in comparison to that of Geithner, who was president of the Federal Reserve Board of New York. And Geithner succeeded Henry M. Paulson Jr., a former chief executive officer of Goldman Sachs.
Still, if dealt a financial crisis like the 2008 calamity faced by Paulson, Lew could rely on trusted lieutenants including Mary J. Miller, undersecretary of Treasury for domestic finance, and Lael Brainard, undersecretary for international affairs.
And Lew will not be dealing with anything like the sprawling 2010 financial regulatory law (PL 111-203) that was intended to make the financial system safer and prevent future crises. Implementation of the Dodd-Frank law continues, but many of the most important pieces are done, and it is largely up to regulators including the Consumer Financial Protection Bureau and the Securities and Exchange Commission to finish putting the law into effect.
Supporters of stricter financial regulation should be pleased with Lew’s selection, according to Michael Barr, an assistant Treasury secretary from 2009-2010 and an architect of Dodd-Frank. “I think Lew would do a terrific job keeping us on the path of financial reform,” said Barr, who now teaches law at the University of Michigan.
Lew has won praise from lawmakers on both sides of the aisle. While he might face some hostile questioning from Republicans on the Senate Finance Committee who are unhappy with Obama’s fiscal policies, he would be expected to be confirmed. The Senate confirmed his nomination as budget director on a voice vote.
Investors are hoping for swift confirmation of whoever Obama nominates as Treasury secretary, particularly with the government having reached its borrowing limit. Obama and his team are facing a potentially nasty confrontation with congressional Republicans as early as next month over a debt limit increase.
“A seamless handing of the baton is pivotal,” Boltansky said, “especially in times of broader market uncertainty like we have experienced during and after the fiscal cliff negotiations.”