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Treasury nominee Jacob Lew faces tough questions on Citigroup job

February 13, 2013|By Jim Puzzanghera
  • Former White House Chief of Staff Jacob J. Lew testifies before the Senate Finance Committee on his nomination to be Treasury secretary.
Former White House Chief of Staff Jacob J. Lew testifies before the Senate… (Mandel Ngan / AFP/Getty…)

WASHINGTON -- Treasury Secretary nominee Jacob J. Lew on Wednesday faced tough questions from Republican senators about his tenure as a top executive at Citigroup Inc. in the years leading up to the financial crisis.

Lew was criticized for not knowing more about the investment strategy of two Citi units for which he was chief operating officer from 2006 to 2009.

Republicans also hit him for an investment in the Cayman Islands and accepting a $944,518 payout from Citigroup in early 2009, just days before the company received an expanded bailout from the federal government's Troubled Asset Relief Program.

"Were you aware that Citigroup was about to receive a multibillion-dollar federal guarantee when you accepted your bonus?" asked Sen. Charles Grassley (R-Iowa).

"Senator, I was aware of the condition of Citi and of the TARP program, yes," said Lew, who received the payout on leaving company to join the Obama administration.

"OK," Grassley said. "Explain why it might be morally acceptable to take close to a million dollars out of a company that was functionally insolvent and about to receive a billion dollars of taxpayers' support?"

Lew defended the money, which included his 2008 salary.

"I was compensated in a manner consistent with other people who did the kind of work that I did in the industry, and I was compensated for my work," Lew said. "I'll leave for others to judge."

Quiz: How much do you know about looming federal budget cuts?

Lew was managing director and chief operating officer at Citi Global Wealth Management from 2006 to 2008 and at Citi Alternative Investments in 2008 until early 2009.

Sen. Orrin Hatch (R-Utah) said that those units participated in proprietary trading and "sales and marketing of risky investments." He pressed Lew on how much he knew about those activities.

Lew said he had limited knowledge.

"I was not in the business of making investment decisions. I was certainly aware of things that were going on," Lew said. "I learned a great deal about the financial products. But I wasn't designing them and I wasn't opining on them."

Hatch pressed Lew on what he knew about some specific securities for which there have been allegations about misrepresentation by Citi. But Lew said he did not remember any conversations or emails about those securities.

"Yes, I was aware that there were funds that were in trouble," he said. "I didn't have responsibility for the funds themselves, but I was aware that those difficulties were going on."

Senate Finance Committee Chairman Max Baucus (D-Mont.) and Grassley also questioned Lew about a $56,000 investment in a Citigroup private equity fund based in the Cayman Islands.

President Obama has been critical of people, including 2012 Republican presidential nominee Mitt Romney, for using Cayman Islands investments to shelter money from U.S. taxes.

Lew said he didn't know the fund was based in the Cayman Islands. He said he lost money on the investment, which he sold in 2010.

"I always reported all income. I always paid any taxes that were due," Lew said.

But Grassley criticized Lew for the investment, which he said was more money than the average American makes in a year, in light of Obama's comments about the use of the Cayman Islands as a tax shelter.

"There's a certain hypocrisy in what the president says about other taxpayers and then your appointment," Grassley said.

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