The Jack Lew Problem

Unlike Bernie Sanders, Elizabeth Warren is a team player--she's been spending time of late reassuring the Democratic Party's traditional power-brokers, both small and large, that she cares deeply for the party's institutions.

Warren has raised eyebrows by noting she would not turn away corporate money in a general election campaign fight against President Trump. "I do not believe in unilateral disarmament," she told MSNBC earlier this year, using a nuclear weapons euphemism to signal her openness to big donors. "We got to go into these fights, and we gotta be willing to win these fights," she said..

The approach highlights a key difference between Sanders and Warren, early on in a crowded presidential primary: the pair agree on a wide range of economic issues, ideological differences aside, but they have different takes on confronting the finance industry's sway over the party; something they both lament. In fact, one of the first things Warren did as a lawmaker was vote to confirm a friend of Wall Street, Jack Lew, as Treasury Secretary.

When Lew was picked by President Obama to lead the Treasury Department in January 2013, he was like the Forrest Gump of Democratic wonks in the neoliberal era. In 1983, as a staffer to then-House Speaker Tip O'Neill, Lew helped hash out legislation that cut social security benefits by raising the retirement age. ("He keeps a gavel from the day the legislation passed, signed by Mr. O'Neill, on a bookshelf in his office," the New York Times noted in December 2012).

A decade later, in the 1990s, Lew joined the Clinton White House, where he was a dutiful and competent foot soldier during the welfare-cutting years, climbing the ranks to lead the Office of Management and Budget by the end of Clinton's second term. Lew received the key position, liaising between the White House and Congress, just in time to sign off on the bipartisan push to let Wall Street do whatever it wanted.

After George W. Bush was elected, Lew received a high-paying administrative position at NYU, where he is, perhaps, best remembered for leading efforts to bust the graduate students' union. At the height of the housing bubble, Lew then took a job at Citigroup, one of the banks he helped make "too big to fail" as a Clintonite bureaucrat.

The presidential election and financial crash in 2008 oriented Lew back to the public sector. In 2009, the day before Citigroup took a massive public bailout, he left the bank to take a job with the Obama administration--with a $944,578 bonus for accepting a "high level position with the United States government or regulatory body." Lew had mostly kept his head down--the way he preferred to operate, as friendly profiles noted during his rise through the ranks. But his reputation was no secret. His most memorable contribution during Obama's first term may have been his trial balloon for slashing Medicare benefits, the exact same way he helped pare back Social Security payments during the Reagan administration, as an aide to O'Neill.

"Like Mr. Obama, Mr. Lew is a pragmatist," The New York Times noted in its year-end profile, weeks after the 2012 election. "[O]ne person familiar with his thinking said he had previously expressed willingness to raise the Medicare eligibility age from 65 to 67."

Lew was the sort of knife-by-spreadsheet wonk that Warren campaigned to confront during her 2012 run for senate in Massachusetts. In her first major speech as a politician, speaking before the Democratic National Convention, Warren appealed to voters "who feel like the system is rigged against them."

"Wall Street CEOs--the same one who wrecked our economy and destroyed millions of jobs--still strut around Congress, no shame, demanding favors, and acting like we should thank them," said Warren. A few months later, she voted to confirm the ex-Citigroup Clinton man Lew as Treasury Secretary. (Party leaders didn't even particularly need Warren's vote; Lew's nomination cleared the filibuster threshold by double digits).

Sanders, meanwhile, was resolute in his opposition to Lew's nomination. In a floor speech declaring his intention to vote "no," he denounced widening wealth and income inequality, Wall Street malfeasance, and the growing percentage of profit flowing to the financial sector. The Treasury Secretary should be focused on addressing these problems, Sanders said, and Lew was not. What he found most objectionable, the lawmaker noted, wasn't Lew's Citigroup background or his revolving door bonus, but rather post-2008 testimony in defense of financial deregulation.

"As someone who has worked to elect Barack Obama on two occasions, I remain extremely concerned that virtually all of his key economic advisers have come from Wall Street," Sanders said. "And Jack Lew is no exception to that."

With the election of President Trump and the rise of Sanders and Warren, Lew's legacy speaks for itself. As Treasury Secretary, he spent much of his political capital backing President Obama's failed Trans-Pacific Partnership, a free trade initiative opposed by both parties' presidential candidates in 2016.

Lew also squandered an opportunity to crackdown on tax evasion, after the April 2016 release of "The Panama Papers," the expose of offshore tax havens published by the International Consortium of Investigative Journalists. Treasury's effective response, its "beneficial ownership rule" proposal, was decried as insufficient by knowledgeable observers. At a May 2016 discussion at the World Bank, ex-Senator Carl Levin (D-Mich.) called the plan a "flawed approach" enabling "tax haven firms" to declare that their in-house managers are actually owners of the funds they oversee.

"That's the opposite of the claim, meaning, and purpose of the phrase 'beneficial owner,'" Levin said. The International Monetary Fund also said the rule should have been more in line with global standards on forensic accounting, calling for stricter requirements on non-bank actors selling big-ticket items often used to launder money--commodities like real estate. The rule went into effect last year, with the blessing of an administration headed by a property wheeler-dealer and alleged money launderer.

To be fair to Warren, she might have reacted to Lew differently if his nomination came up later in her tenure. Senators typically face enormous pressure to fall in line with leadership, particularly when they're new to the chamber, and particularly on presidential nominations when the White House occupant is on their side of the aisle.

But Warren has not shown remorse for signing off on President Obama's Treasury Secretary the way she did for approving another one of his industry-deferential financial regulators. Mary Jo White, chair of the Securities and Exchange Commission for Obama's second term, was confirmed by the Senate without a roll call vote (a procedure that one senator could have demanded to log opposition). Just weeks before the presidential election, in October 2016, Warren called for White's resignation, expressing great disappointment in her stint leading the SEC.

It might not be too late, however, for the Senator to offer a postmortem assessment of Lew. His legacy is still ripe for criticism, particularly in a moment when Warren is using her expertise on Wall Street excess to propose new rules for private equity firms. One such company, Lindsay Goldberg, hired Lew after he left office, among other reasons, to focus on "institutional relationships."