Counterparties: America’s “wonk Zelig”

January 9, 2013

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Jack Lew, currently Obama’s chief of staff, will be put up for the top job at Treasury as early as today.

This is the ultimate internal hire: with stints at the director of the Office of Management and Budget and as the Deputy Secretary of State, Lew has “played a role in every big budget deal since 1983,” Joshua Green writes. “He’s a wonk Zelig.”

If there’s a contrast with current Treasury chief Tim Geithner, says Matt Yglesias, it comes not so much from Lew’s background, but from his focus. Geithner is “very much a finance guy” — even though he never actually worked on Wall Street — while Lew is an “in-the-weeds legislative wrangler”.

This isn’t to say Lew has no finance experience: he served a two-year stint at Citigroup, where his group, among other things, invested in John Paulson’s bet against the housing market. One of Green’s sources says Lew ran “a third-rate division at a third-rate bank.”

The Conventional Wisdom pro-Jack Lew case can be found in the many glowing profiles about his “nearly impeccable record”. Lew is consistently portrayed a get-thing-done centrist who has a knack for bipartisanship. In a 2011 profile, Ben Smith called him one of “last of the pragmatic liberals”. This quality lead him to be hailed as “the man who could save Obama’s legacy”. (Nonetheless, Republicans have still managed to hate the pick).

The anti-Lew crowd, on the other hand, apparently includes Wall Street. Because Lew isn’t an industry insider — like, say, Erskine Bowles or Larry Fink — the nomination is “a signal that the president is not as serious about mending his relationship with corporate leaders”, Stephen Gandel says. Jonathan Weil, for his part, thinks Lew is too close to Wall Street, just by virtue of his resume. It may come as some consolation to Wall Street that Lew has said he doesn’t believe deregulation caused the financial crisis, and reportedly busted unions during a stint at NYU. Also, his signature, which will appear on US banknotes, does bear a passing resemblance to a Wall Street bonus check.

As Treasury Secretary, Lew — who has no real experience in financial regulation — will also be the head of the Financial Stability Oversight Council, a new group of regulators charged with preventing the next crisis. And, in picking Lew, Obama may have overlooked other candidates: “The White House has not named an actual outsider to their economic team since taking office,” Ezra Klein writes. — Ryan McCarthy

On to today’s links:

Tin Machines
What David Bowie’s new single tells us about consumption capital – Stumbling and Mumbling

Why the Basel change was a bad idea – Felix

Dan Loeb and Bill Ackman are squaring off over the future of Herbalife – Reuters

Jamie Dimon, blind-item gossip merchant – Bloomberg

The Fed
Meet the Fed’s lone dissenter who thinks the central bank has gone way too far – Binyamin Appelbaum
Switzerland’s central bank is waging risky a currency war against the Euro – WSJ

Crisis Retro
AIG decides not to sue the government that bailed it out — Reuters

Morgan Stanley plans to eliminate 1,600 i-banking jobs — Bloomberg

EU Mess
Mario Draghi delegates, listens and doesn’t try to out-German the Germans – Reuters

Dead Ends
It’s official: 3D is dead – The Verge

An ex-SAC analyst has given Fed 20 names of people he says are guilty of insider trading – DealBook

Redditt raises $1 million at a $400 million valuation – Peter Kafka

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