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Another reason for pessimism about the new Treasury chief

February 28, 2013 - Mike Maneval
On Wednesday the U.S. Senate confirmed Jacob "Jack" Lew, Wall Street insider, as the next Secretary of the Treasury.

Three weeks earlier on this blog, I detailed some of the reasons why Lew's nomination for the post by President Barack Obama should leave any American voter concerned about accountability and financial-sector reform feeling pessimistic. Lew's past statements indicate skepticism about the obligations of the federal government to provide regulatory oversight, he held a $1 million-a-year job at CitiBank, one of the financial services firms that accepted a federal bailout, and his coziness with Wall Street and the ways in which he has benefitted from the revolting "revolving door" between government perches of power and Wall Street's positions of privilege have left him with critics across the political spectrum.

But at the week's beginning, journalist Kevin Drum of progressive Mother Jones magazine and the conservative editorial page of the Wall Street Journal chronicled yet another reason to fear Lew's latest government position. While at the bailed-out financial firm, Lew had a provision in his contract promising a hefty bonus if his exit from the company was to take a "high level position with the United States government or regulatory body."

This, according to the Journal, was the exact language of the contract. As the Journal then notes, no such guarantee is in place for taking a job with a state government, or with an independent non-profit organization. The provision, however, does specify that a job in a regulatory capacity would net Lew the bonus.

Mark Kleiman responded to Drum's reporting, arguing that a deal to guarantee a bonus alleviates CitiBank of the risk that deciding to give Lew a bonus only when he would be appointed to an influential government post would be perceived as a bribe - an argument I find absurd. It's an argument that presumes the perception of conflict of interest can be avoided if payoffs are predetermined in advance. It's also an explanation that treats the revolving door - and its increasing concentration of power in the hands of the well-connected - not as a detrimental lodestone the government should attempt to eradicate but as an immutable trait of the modern American economy.

And perhaps with Kleiman's good friend Lew running the Department of the Treasury, the government will shirk from attempts to stop and dismantle the revolving door and instead treat the limitation of leadership to an insular band of cronies as immutable.


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