2013-02-13 20:35:27

Treasury Secretary nominee Jack Lew faces questions on hedge fund investment, offshore tax haven

As the President continues to chart a course for his second term, his cabinet is still taking shape. While lawmakers easily confirmed John Kerry as Secretary of State, other nominees are facing stiffer resistance, including former Nebraska Senator Chuck Hagel, the nominee to lead the Pentagon. He was approved by the Senate Armed Services Committee Tuesday in a 14-11 party-line vote. But Republicans have vowed to continue challenging Hagel, a Republican himself, by delaying a vote in the full Senate.  Senators questioned another Cabinet nominee, Treasury Secretary candidate Jack Lew, at a Senate Finance Committee hearing today. Lew served as Obama’s Chief of Staff and director of the Office of Management and Budget under both Obama and Bill Clinton. He also worked in the corporate world. At Citigroup, a recipient of the taxpayer funded bank bailout, he oversaw a hedge fund investment division that profited off betting on risky mortgages. Lew testified that he didn’t have a hand in making the risky bets himself.

“I was not in the business of making investment decisions. I was certainly aware of things that were going on. I was working in a financial institution. I learned a great deal about the financial products. But I wasn’t designing them I wasn’t opining on them. I take away from that experience a deep understanding that there are risks that we need to guard against and I would be delighted to discuss the policy considerations as we go forward.”

Some also questioned Lew about a $56,000 investment in a Citigroup Cayman Islands offshore tax haven. That information has been public but Republicans are highlighting it as “hypocrisy” from the Obama administration, which criticized Mitt Romney’s offshore investments. Lew told senators he adhered to the law and ended the investment once he returned to public service.

“I invested in the fund as an employee and I divested from the fund when I was confirmed for a position and the office of government ethics recommended or directed the divestment. My benefit was really very small in the sense that I took a loss when I sold the investment. I always reported all income, I always paid any taxes that were due.”

As Treasury Secretary, Lew would recommend policies on US spending and debt; oversee Social Security and Medicare trust funds; and play a key role in regulating the financial sector. Lew told lawmakers today that the Dodd-Frank financial reform law, which is still far from full implementation, was necessary and he’d make its oversight provisions a priority. As the Committee considers his nomination, other cabinet posts remain unfilled, including the EPA, Labor Department and Energy Department.

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