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Reply #10


Response to naaman fletcher (Reply #9)

Tue Feb 26, 2013, 12:50 PM

10. Um, no.

http://nymag.com/daily/intelligencer/2013/02/did-citi-pay-jack-lew-a-government-job-bounty.html

First, it's useful to clarify: Jack Lew didn't get a "bonus" for leaving Citigroup to go to the public sector. There was no extra money involved. Instead, by taking a high-ranking government job, Lew simply got to keep the bonus money he had already been paid. Several other circumstances would have allowed him to keep that money even if he left Citigroup. They included "a significant reduction in your title/function or responsibilities" and "a relocation of your principal place of employment to a location that is not within a commutable distance in the New York City area." All that was notable about Lew's contract is that it put acceptance of "a full-time high level position with the United States government or regulatory body" on the list of circumstances under which it was okay for him to leave without forfeiting his bonus.


So, why did it do that? After reading Jonathan Weil's column and looking at the first three pages of Lew's employment agreement, the most likely chain of events I can think of is this: Lew was a longtime D.C. budget wonk who, in 2006, was taking a break from the public sector and wanted to make a lot of money for a few years before going back to Washington. Lew's old mentor Robert Rubin got him a job at Citigroup that paid $300,000 per year, plus a guaranteed bonus of at least $400,000 that would be prepaid for his first year on the job.

Most high-level Wall Street jobs come with pretty severe restrictions on what happens to your deferred compensation if you decide to leave. And since Lew's money was being paid up front, the bank had a vested interest in making sure he stuck around for the entirety of 2006 and didn't go work at Goldman Sachs or a hedge fund down the street.

But Lew, who spent the vast majority of his career in government, likely knew he was never going to stay at Citigroup forever he was only using the bank as a short-term, high-paying stopover. So it behooved him to make sure that he wasn't subject to the same rules as other Citigroup employees. If the opportunity to move back to the public sector presented itself say, if Ben Bernanke dropped dead and Lew was offered the Fed chairmanship he wanted to be able to take the job without losing all of his Citigroup bonus money. So it may be that Lew who was a major hire for Citigroup and thus had negotiating leverage was just looking out for himself, and that the "high level position with the United States government" contract clause was his idea, not Citigroup's.

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Purveyor Feb 2013 OP
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naaman fletcher Feb 2013 #9
LineLineLineLineLineLineLineLineNew Reply Um, no.
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