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Sun Jan 13, 2013, 11:25 AM

The Inconvenient Truth About Jack Lew

By Robert Scheer

I suppose that he can’t be much worse than Timothy Geithner, but that should be scant cause for cheer over the news that the president has nominated Jack Lew as Treasury secretary. Both championed the financial deregulation craze of the Clinton administration, and both are acolytes of Robert Rubin, the former Clinton Treasury secretary who unfettered Wall Street greed and then took his own considerable cut of the action.

When asked by Sen. Bernie Sanders, I-Vt., at a Senate confirmation hearing in 2010, when Lew was nominated to be head of the Office of Management and Budget, whether the deregulation pushed by Rubin and former Fed Chairman Alan Greenspan had “contributed significantly” to the banking crisis, Lew responded:

“Senator, I don’t consider myself an expert in some of these aspects of the financial industry. My experience in the financial industry has been as a manager, not an investment adviser. My sense, as someone who has generally been familiar with these trends, is that the problems in the financial industry preceded deregulation. There was an increasing emphasis on highly abstract leveraged derivative products that got us to the point, that, in the period of time leading up to the financial crisis, risks were taken, they weren’t fully embraced, they weren’t well understood. I don’t personally know the extent to which deregulation drove it, but I don’t think deregulation was the proximate cause.”

Really? That is a statement of such deliberate ignorance that one must marvel at Lew’s audacity in uttering it. He was one of the top economic officials in the Clinton administration when the president signed the Commodity Futures Modernization Act into law that declared all of those “derivative products” exempt from the reach of any existing government regulation or regulatory agency. It was aimed at silencing the warning of Brooksley Born, who, as head of the Commodity Futures Trading Commission, attempted to control the burgeoning market in the toxic assets that have carried such a huge human price in foreclosed homes and lost jobs.



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Response to SHRED (Original post)

Sun Jan 13, 2013, 11:31 AM

1. Maybe I'm naive, but I'm a little hopeful because

Jack Lew has WPA art in his office. If he didn't have some beliefs in FDR's values, I don't think he would have that art there.


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Response to SHRED (Original post)

Sun Jan 13, 2013, 01:01 PM

2. When Lew is Asking "I Don’t Think Deregulation was the Proximate Cause"

it amounts to questioning whether the unsound loans, mortgage-backed securities, and overleveraging would have been prevented if Glass-Steagall had still been in effect.

Some of the behavior was illegal both before and after 1998, and clearly, the banks and investment firms would have been separate. Other than that, was some of the behavior preventable under the previous regulatory environment? I really don't know the answer.

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