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Jack Lew’s Grotesque Citi Employment Deal and the Institutionalization of Corruption

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Corruption has now become so routine in Washington that improprieties far worse than Turbo Timmie’s implausible failure to pay taxes on income from his days working as a consultant to the World Bank barely evoke a yawn from the media. Apparently the fourth estate is either so bedazzled by star turns, like Michelle Obama presenting at the Oscars (!!!) or so cowed by the prospect of being cut off from information that it dutifully falls in line.

Let’s look at the presumed incoming Treasury Secretary, Jack Lew. He’s a die hard neoliberal, played a role in financial deregulation as Clinton economics team member, and a backer of NAFTA. But what is surprising is the limited interest in his personal dealings, which have been examined critically by Pam Martens and Bloomberg’s Jonathan Weil. Recall that Lew is essentially a career elite technocrat, with his major stint out of government being during the Bush Administration, when he first served as the Executive Vice President for Operations at NYU (where his noteworthy accomplishment was busting the bargaining rights of grad students) and then became the chief operating officer for Citigroup’s alternative investment group.

Weill zeroed in one provision of Lew’s employment agreement at Citigroup, that if Lew left for a “high level position with the United States government or regulatory body” his 2006 and 2007 guaranteed incentive and retention awards. The 2008 rider to the letter provided that if Lew left for the same type of “high level position” his restricted stock would vest immediately. Frankly, I think Weil is more riled up about this provision than he ought to be. The bank was giving particularly generous guarantees for joining. There was no reason to pay out on those guarantee if Lew broke his contract, unless he went to do something that would be of comparable value to the bank. You may not like the logic, but this is pretty cold commercial logic at work. Weil seems to have misread the “guaranteed incentive and retention awards” to mean Lew’s annual bonus on an ongoing basis. It didn’t. It’s a defined term that refers only to special goodies he got in 2006 and 2007.

What I find more disturbing is if you read the totality of Lew’s agreement versus Citi’s performance and Lew’s 2008 pay.

Remember, Lew came from a job at NYU where he already looks to have been considerably overpaid. He received over $840,000 for the academic year 2002-2003, which had him earning more than most university presidents, including NYU’s president. And on top of that, as Pam Martens ferreted out, he was apparently given a $1.3 million house. I’m not making that up, go read her piece. The mechanism was that NYU lent the $1.3 million to buy the house to Lew and then forgave it over five years. Oh, and they paid him the money to pay the interest too. We will assume that the forgiveness of debt was reported properly to the IRS.

Now the house deal (which is rather bizarre given that NYU owns lots of nice faculty housing) might be what made Lew’s pay deal so out of line relative to his job. But if the forgiveness of debt was not included in the total, it’s even more insane, the equivalent of $1.1 million a year.

But Citi was still happy to pay over the market. If you read the Lew employment agreement, he got a $300,000 salary and a $1 million a year guaranteed incentive and retention award for each of 2006 and 2007. Oh, and he ALSO got a $700,000 signing bonus in restricted stock (or cash if the relevant committee did not approve the award!) that would vest 25% a year over the next four years. Oh, and the last goodies: he got his offer letter on June 26, 2006, and he joined in July. But his $1 million guaranteed incentive and retention award was NOT pro-rated for that year. And he got to take a $400,000 advance against it when he joined.

Now a general rule in headhunter land is you need to pay someone a 30% premium over their current job to get them to leave. But that is when they are recruiting someone with a good resume who is well situated away from a pretty secure position. You are paying them for assuming the risk of failure in a new job. There’s no evidence that Lew was aggressively courted to leave his job at NYU because a university administrator would be the perfect guy to play an executive role in a hedge fund business. The flip side, of course, is if a guy like Lew landed a plum government or regulatory job after Citi, pretty much any pay level would be a screaming bargain. And between Lew’s own history and then Citigroup vice chairman Bob Rubin’s deep network in the Democratic party, it would seem that the only risk was how long it took to get the Dems back in power.

But let’s look at what happened. Remember how Citi’s stock has cratered?

It is really hard to discern the scales, but Lew’s $700,000 award would have been made when Citi was trading (in post reverse split term) in the $480 to $500 a share range. When he joined the Obama administration as deputy secretary of state, the stock was in the $15 to $18 range. So it was pretty much worthless. Any restricted stock component of his 2007 bonus would also have lost most of its value.

Now, Lew’s salary was increased to $350,000 in 2008. Given that the bank was hemorrhaging losses and his unit was part of the problem, there’s no justification for a salary rise (remember, the wheels were staring to come off in 2007, as Citi’s stock price attests). Let us look at how Goldman, which was one of the stronger major players,* handled executive and staff pay in 2008. From Bloomberg:

Goldman Sachs Group Inc. eliminated 2,500 jobs in the fourth quarter and slashed average pay per worker 45 percent to $363,654 as the firm posted the first quarterly loss since going public almost a decade ago….

Goldman Sachs Chief Executive Officer Lloyd Blankfein and six deputies agreed to forgo their year-end bonuses after the firm converted to a bank-holding company and accepted $10 billion from the government to help it survive a financial crisis that eliminated three smaller rivals. The firm’s bonus pool, estimated at 60 percent of total compensation, dropped to $6.56 billion or an average $218,193 per employee this year.

Yet Lew’s 2008 bonus of $944,000 was almost identical to his 2007 guarantee (note that we don’t know if he got any other goodies in cash, but again, given that the earnings of the bank fell 83% from prior year levels, that would be awfully unseemly). And let us not forget that this came out of taxpayer largess, not earnings.

Weill adds that Lew stood to receive another $250,001 to $500,000 in the cashout of restricted stock. Given the stock chart above, that has to have been almost entirely a 2008 award, any prior year awards would be worth chicken feed. And the bank knew as of November 15 (if not sooner) that Lew was going to the Administration, hence the award would be paid out in cash, out of taxpayer monies. In other words, that award should not be mistaken as a prior year grant, it’s almost all for 2008, and on top of that, probably understood at the time it was awarded to be effectively a cash award.

This isn’t hard to understand. When Lloyd Blankfein, who was excoriated by former Goldman co-chairman John Whitehead for Goldman’s role in leading “outrageous”n pay increases over Wall Street, is requiring significantly lower pay levels of his executives and troops for their 2008 pay. By contrast, a mere (albeit senior) administrator at a bank on government life support, got an effective increase. Yet as reported in the Washington Times, Lew had the temerity to tell Congress:

My position at Citi was a management position,” Mr. Lew replied. “I was not an investment adviser. My compensation was in line with other management executives at the firm and in similarly complex operations.”

It may be true that the entire executive team was feeding at the trough as much as Lew. However, a look at the proxy shows that none of the top five executives at Citi took cash bonuses for 2008. So if top executives were taking major pay cuts, how could Lew, an administrator in a money-losing unit, claim to be treated just the same as everyone else?

But this simply means that Lew is a member of a protected class. The rules that apply to little people, including giving accurate, as opposed to strained-at-best, answers to Congressmen, just don’t apply to him. The idea that his pay package was basically a huge option payment by Citi on the pretty good odds that he’d land another big deal official post, doesn’t seem to occur to him. And why is that worth so much to Citi? Well, as we know, corruption in the US does not (often) take the form of briefcases full of cash being left in an office. It’s an ugly combination of intellectual capture, of mutual backscratching, and “don’t rock the boat,” of accepting norms of discourse, behavior, and action, that circumscribe the range of possible actions.

Lew no doubt believes he was paid according to merit, despite the blindingly obviously evidence to the contrary. And that sense of entitlement is what will enable him to kill old people without a second though. Because that is what winning cuts to Social Security and Medicare will do, given that Obama punted on his chance to tackle the health care cost problem.

I had predicted Lew would have us wanting Geithner back. At least Geithner would get twitchy when grilled. That means, somewhere inside, he actually knows right from wrong. Lew is such a bland technocrat that I wonder whether he has any compunctions.

But the lack of consternation about Lew’s financial record, and the way some respected members of what passes for the left (Robert Reich and Jamie Galbraith) have defended Lew, in part also shows how much things have changed in a mere four years. Obama’s lying has become so predictable that it’s hard to stir up any outrage over it.** And since fish rot from the head, one of Obama’s singular accomplishments is in defining deviancy down throughout the Beltway. For instance, Obama took the unheard-of step of collecting “unlimited corporate cash” in the words of Roll Call, with virtually nil in the way of disclosure, taking even stalwart supporters like the Grey Lady aback.

So Lew is indeed perfect for his new role, just not in the way ordinary Americans expect him to be.

_____
* I don’t buy Jamie Dimon’s claims re JP Morgan’s financial condition. Yes, the traditional bank was in vastly better shape than Citi or Bank of America. But JP Morgan runs a monster derivatives clearing operation which dwarfs the risk in the traditional bank. If AIG or Morgan Stanley had failed after Lehman, the blowback would most assuredly have taken JP Morgan down as well.
** Yes I know politicians lie, but Obama has completely redefined the boundaries of acceptable political fudging. It’s now all dishonesty, all the time.

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62 comments

  1. Arkansasangie

    Until we have blasted the quaint idea that there is a difference between republicans and democrats the corruption will continue.

    No more wedgies.

    Vote them all out of office.

    1. ScottS

      All other parties combined garnered around 1% of the vote during the last presidential election. This could take a while.

  2. Michael M Thomas

    There’s a good Lew Op-Ed in today’s NY Post by Rich Lowry of National Review. Shows that there are some deals of which the stench is too much even for the far right to bear!

    1. MRW

      I second that. Yves Smith has more balls than a football team. Hooray.

      But we’re up against it with Lew. Protected class, indeed. A protected Friday night sinecure.

  3. sd

    ** Yes I know politicians lie, but Obama has completely redefined the boundaries of acceptable political fudging. It’s now all dishonesty, all the time.

    Honesty is for little people.

    1. diptherio

      It seems to me that the phenomena of outright lying by politicians, pretty much all the time, whether democrat or republican, has been going on for far longer than 4 years. In my experience, a political actor (whether they are an officeholder, candidate, or hack) who is willing to knowingly “fudge” the facts in order to support his/her political position will also lie outright to do the same. Most of the hacks that I’ve met and worked with have a very hard time distinguishing between “fudging” and lying, and are very good at rationalizing whatever they happen to be doing or saying at the time, so long as it is expedient.

      Honesty in political dialogue, I think, is something everyone should become real sticklers for. The culture of “fudginess” and “truthiness” has gotten us into a lot of trouble; it is now incumbent upon us to demand forthrightness from our politicians and commentators. Democratic constituents need to be calling-out their Democratic politicians when they lie, fudge, or omit important details. Republican constituents need to do the same. When it comes to politics, if we were seekers after truth first, rather than seekers after winning a debate, we might live in a much saner world.

      1. Mark P.

        Politicians have always lied.

        The problem is what the lies currently facilitate — the unprecedented levels of the looting, the sums involved, the brazen belief that the kleptocracy is now entitled, in the words of one of the Kochs, to “all of it.”

  4. Middle Seaman

    I find the outrage in the post and the comments stale and displaced. We have given up our government to the private sector, lately Wall Street, at least 15 years ago. When OWS staged an uprising we stood on the sidelines and chuckled at the kids. Our current president would have never been elected unless Wall Street has made a conscious decision to select him over Hillary who they didn’t believe they can lead by the nose.

    Now you are screaming that money changes hand improperly. You are wrong, it’s very proper for the banks and the other gamblers. WS gratitude is spell money, money and money. Everyone important in the government that helps them gets piles and piles.

    1. JTFaraday

      “When OWS staged an uprising we stood on the sidelines and chuckled at the kids.”

      Speak for yourself.

      1. Sgt. Friday

        When Hilary was First Lady, she went to Beijing and told the Chinese to stop killing their daughters.

        As Secretary of State, she went along with our policy of subsidizing the Muslim Brotherhood.

        The moral corruption that you see in the Obama administration (and I am not making a partisan argument here; it’s just the subject at hand) is so Protean, so I don’t know ubiquitous, it’s hard to know what to think.

        Situational, as they say.

      2. Daikon

        And Lew worked for Hillary at State before moving over to the White House. Hillary “introduced” him to O.

    2. albrt

      I very much appreciate folks like Yves and Jesse playing Diogenes.

      That said, it is probably better for all of our mental health to recognize that the American people voted for what we have, reelecting both Bush and Obama, with full knowledge of the material facts easily available for free on the internet.

      It isn’t going to change unless there is a crisis of greater magnitude than the last one, and even then it probably won’t change for the better.

      Individual moral and economic arrangements must be made against that backdrop.

      1. diptherio

        While the facts are available on the internet, one has to know where to look, and it is, I think, incorrect to say that voters have knowledge of the material facts. Most people depend on the MSM for their news and believe most of what they hear. Politicians lie constantly and mainstream pundits don’t point it out. Because of this, most people are almost completely unaware of the material facts.

        Also, even the vigilant can’t know material facts when they are routinely placed under cover of “national security” until years or decades after the fact.

  5. Jackrabbit

    I have to take issue with the following:

    “Institutionalization of Corruption”
    Your ‘banality of evil’ seems to both insufficient and exculpatory. MSM is largely captured/effectively manipulated by the unholy alliance of the Obama Administration and Wall Street.

    And the way you talk about Citi seems quite misleading. Institutions being _used_ for corruption is different that institutionalization. Lew’s preferential treatment almost certainly came about from friends/foaf’s at Citi.

    And it seems that you are not aware of Citi-NYU dealings that probably benefited Lew (in that Citi had sufficient pull to get Lew a cushy position). (ht ZH, IIRC)

    “Lew no doubt believes he was paid according to merit…”
    What makes you say this? I think, instead, that: Lew almost certainly knows who he owes for his good fortune and whomever that is/are, he/she/they have great confidence that he will listen and respond to their concerns/wishes.

    1. Jackrabbit

      Also: “… if he landed a plum job…”

      It’s very hard to imagine that he wasn’t expecting/expected to return to government given the relevance/benefit of his prior experience in the Clinton Administration (especially as OMB Director).

    2. diptherio

      The manipulation of the MSM by financial interests is far older than the Obama administration. Ever heard of W.R. Hearst? The evil has been around (and in charge) for so long that it really has become banal for those who move in rarefied political circles; they don’t notice it any more than fish notice water or worms notice dirt.

      The evidence of this is that politicians and hacks will often openly admit to the most despicable acts, brag about them even, and then be surprised when others don’t applaud their chicanery. If they thought what they were doing was really that bad, they wouldn’t be so open about it. I’ve had enough conversations with hacks to have had this experience a number of times.

      The authors of the book Snakes in Suits found in a survey of corporate execs that about the same percentage scored moderately high on the psychopathy checklist as the general population (~20%), but that the percentage of very high scores was over twice that of the population at large (~4%), IIRC. So, some of the a-holes probably know exactly what they are doing and just don’t care, some of them don’t think it’s that bad and they justify their actions, and some of them probably just don’t get it at all.

    3. Yves Smith Post author

      You seem to miss the tender fact that Citi was a ward of the state when Lew’s 2008 payouts were made. And as Sheila Bair describes at length in her book Bull by the Horns, Geithner went to remarkable lengths to protect Citi management. Lew’s 2008 pay level resulted directly from that intervention and was effectively on the public’s nickel.

      1. jake chase

        This is another wonderful article, but I wish you would realize that distinguishing corporate corruption involving companies that are ‘profitable’, on the one hand, and ‘wards of the state’, on the other, is naive. Identical sociopathic activities result in predictable amounts of corporate ‘success’ and corporate ‘failure’, and every single one of our corporate and financial behemoths is essentially a ward of the state, because it is the state which enables its activities from morning to night.

        These top executives alternately worshipped and damned are all playing the same game and for the same stakes, cash for themselves, risk and suffering for everyone else. It doesn’t matter whether they are peddling dreck in warehouse stores, or manipulating stocks, or floating loans to suckers with no hope of servicing them, or pushing dubious drugs, churning out degrading entertainment, or bogus consulting reports, issuing fictitious financial reports, preening on morning television, greasing the wheels for corporate predation in so called ‘government service’, etc., ad nauseum.

        The days when more than a handful of those inhabiting our executive suites were anything but charming sociopaths are long gone, if indeed they ever existed, which I very much doubt.

        Corporate life is about looting. Any benefits trickling down to the general population are fortuitous.

      2. Jackrabbit

        Corporations are run by people.

        Crony favortism involves people.

        Saying: Citi did this, or Citi did that DOES institutionalize corruption because it masks the bad actors (just as they hope for).

        I know that you ‘get’ this, and it may be difficult to ‘name names’ without solid info but being imprecise plays into the scam.

  6. Fraud Guy- Also

    Maybe it goes without saying, but another obvious point regarding Lew’s tenure as “COO of Alternative Investments” at Citi: What on earth did he know about alternative investments that qualified him for this position? When people get hired for positions that they are manifestly unqualified for, and paid far above their market worth for that position, cronyism of one sort or another is always the explanation.

    Lew’s situation reminds me of a football star I went to high school with. He was recruited to college (in the Ivy League) based, in part, on the coach’s promise that a booster alumnus would give him a summer job that would pay enough to cover his entire tuition (not just the part that he wasn’t getting financial aid for). Even the NCAA would probably consider it a corrupt arrangement if a party-at-interest paid an 18 year-old $60K today for a summer job for which the kid had no particular qualifications. But with our government/finance elites, the reaction is “nothing to see here.”

    1. J.

      Perhaps Alternative Investments is the polite way to describe cronyism? In that case I would say Lew is highly experienced.

  7. JTFaraday

    Lew’s stinky smelling Citigroup pay deals are almost certainly part payback for Citi’s “preferred lender” deal at NYU, which is after all the largest “private” university in the country, and part pay forward for his eventual return to the DC cesspool—which is where we are now.

    “During Mr. Lew’s five-year tenure as executive vice president for operations at NYU, from 2001 to 2006, the average tuition and fees paid by students increased nearly 40 percent.”

    Massive tuition increase, along with a simultaneous (over)enrollment drive, along with the inevitable dip further into admissions standards barrel. Meanwhile, there is no question that–in the real world– there is a correlation between what academics consider to be adequate preparation and socioeconomic background.

    So, we’re driving up both tuition and enrollment levels, as well as loan levels at NYU, hitting more vulnerable populations in the process. Then we add the Citi deal:

    a ““preferred lender” arrangement… with Citigroup… Under the terms of the arrangement, NYU received $1.4-million in “revenue sharing” from Citibank for referring students to its loans. Citibank broke off the deal in 2007, after reaching a settlement agreement with New York’s attorney general at the time, Andrew Cuomo.”

    http://chronicle.com/blogs/bottomline/senator-grassley-grills-treasury-nominee-about-past-job-at-nyu/

    Then we get the inevitable token law suits, that don’t really address the damage to those vulnerable to the wheeling and dealing of their social betters:

    “Less than a year after Mr. Lew went to Citigroup, the company agreed to pay $2 million as part of a settlement reached with the attorney general at the time, Andrew M. Cuomo, over Citigroup’s role as a preferred lender to students at N.Y.U. and other colleges. The case focused, in part, on what were basically kickbacks being paid by preferred lenders to universities; N.Y.U. paid $1.4 million to reimburse students as part of the same settlement.

    The university chose Citigroup as a preferred lender during Mr. Lew’s tenure, a subject that has arisen during questions to Mr. Lew from Senate Republicans.

    “I do not recall having any conversations with Citigroup officials regarding Citigroup’s selection or actions as a preferred lender for N.Y.U. students,” Mr. Lew told senators. “Also, I do not believe that I approved the selection of Citigroup as a preferred lender for N.Y.U. students.””

    http://www.nytimes.com/2013/02/26/nyregion/lew-treasury-nominee-got-exit-bonus-from-nyu.html

    He “does not recall.” He “does not believe”–a likely story.

    Now the NY Times is wondering about his exit deal from NYU, as it is rumored to be an “amicable departure,” not a mutually hostile buyout requiring payment. Money just seems to magically find this guy.

    Looks like we all need to get jobs in Washington.

  8. JTFaraday

    “But the lack of consternation about Lew’s financial record, and the way some respected members of what passes for the left (Robert Reich and Jamie Galbraith) have defended Lew”–

    Ha! I seem to recall having called James Junior “rat tailed Jimmy” some months back, wondering why he has never– in his long career as a tenured public policy professor at a state subsidized university– lead a research team geared toward devising a new industrial policy for a changing America.

    http://www.youtube.com/watch?v=1XHcPYorSJw

    But when he yaks on and on about “teh jobs” without ever actually doing anything about it–who else is supposed to do it, if not tenured public policy professors with biological ties to the federal regulatory state?– you all get starry eyed, my friends.

    Now we’re all supposed to belatedly orgasm over the minimum wage “‘job guarantee buffer stock’ reserve army of labor,” because “any job is better than no job.”

    There’s a special place in hell, you know.

  9. Cynthia

    Mrs. Obama’s appearance at the Oscars will be known as the “jump the shark” moment in the Obama Presidency.

    As the mystique fades in stark contrast to the feckless and vapid “leadership” provided by this President, Mrs Obama’s turn in the Oscar spotlight will mark the point when the Emperor was revealed to have no clothes – Hollywood style.

    Argo is pretty much a propaganda film for Americans. Could you imagine Hollywood making a movie about how we overthrew Mohammad Mossadegh and put a western-backing puppet in power? We always have to paint the others as bad guys.

    1. McMike

      “Argo is pretty much a propaganda film for Americans.”

      I haven’t seen it, but it is indeed auspicious timing for an anti-Iranian, pro-American, they-started-it film, is it not?

      1. Cynthia

        Hollywood has always been a propaganda tool in the hands of the USA government. It simply follows the idea that the USA is the greatest country in the world and other nations and people are second class citizens. The USA wants to harm Iran at any price, and they will use Hollywood and its films to picture Iranians as barbarians and the Americans as supermen. The best way to treat Hollywood as well other American propaganda products is to ignore them. Evil always destroys itself.

        1. jurisV

          I agree with your idea of Hollywood being propagandistic, but I disagree strongly with the idea of ignoring it. While evil inherently contains the seeds of its own destruction, the scale of the associated devastation is overwhelmingly huge. It needs to be confronted wherever it raises its seductive songs and illusions.

          1. Cynthia

            At a time when forty million Americans are either unemployed, or underemployed, flaunting expenditures of taxpayers’ money with Michelle Obama’s Oscar gown, and trimmings, and having the President spend a great deal of money on exclusive golf vacation, does not display an Administration that cares about the people, an Administration with the compassion Obama promised to show for the downtrodden.

          2. jurisV

            I agree with you about the “excess” that was displayed in that Oscar performance from the White House. The vision of MO backed up by military officers Dress Uniforms (I do understand that they have to buy those personally…) and then joined by a celebration of the propagandistic “Argo” really churned my stomach.

            It was a very bizarre and creepy tableau!!

          3. Ms G

            @Cynthia. Very eloquently put.

            The disgraceful displays of Mr. and Mrs. Obama — she, the gowned Oscar Girl; he, golfing with his masters in Shangri La with a press ban — are of a piece (in macro) with Michael Ruben Bloomberg’s insistence on holding the NY Marathon with its starting point in the Ground Zero of Sandy’s devastation in NYC — an amateur sports event was going to start in the midst of men, women and children exposed to the elements having lost everything.

            This isn’t “like” Louis XVI and Marie Antoinette.

          4. MRW

            You are concentrating on the wrong things when you go after the gown and golf. She is the First Lady. He is the President. If that’s the level of your complaint, you don’t understand the Office.

  10. craazyman

    $840,000 and a $1.3 million house.

    That’s a lot of student loans!

    They couldn’t have found somebody equally capable for $420,000 and a $650,000 house?

    I bet any subway car on the Lexington Line at 8:30 a.m. would have two or three who could go to meetings and planning sessions and stay awake with a coffee.

    1. Emperor Wang of Market Mongo

      I’m disappointed that this post doesn’t play up the importance of “hard work” in getting ahead in any world.

  11. Jackrabbit

    Not sure if this means anything, but it seems interesting:

    John Sexton became President of NYU in May 2002 (He was Dean of the NYU Law School from 1988-2002). From January 1, 2003 to January 1, 2007 (During most of the time that Lew was at NYU), he was the Chairman of the Board of the Federal Reserve Bank of New York (source: Wikipedia).

  12. McMike

    What is notable about all these massive bloated bodies of blatant open corruption floating to the surface is that they defy our ability to describe them; there is no frame for us to put them in perspective.

    The tens of trillion of value given to the banks for free, the MF global theft, the LIBOR scandal, the robosigning/fraud epidemic and whitewash…. now the open bounty placed on revolving door jobs.

    Every tme a new scandal comes out, I am left flailing for a way to get a handle on it.

    I suppose that it’s like when the Spanish ships first appeared on the horizon in the new world. The natives couldn’t even develop a mental frame adequate to see them.

    It’s one of those moments in the movies when the protagonist realizes that every one around them is a zombie/alien, including their mother and wife. Inevitably, the camera spins in widening circles and the music swells. Then, the protagonist either gets his intestines eaten, or grabs a gun.

    1. McMike

      Absolutely, democratic self determination and bona fide populism are unserious notions.

      Serious people know that austerity for the masses, socialism for the rich, broken promises for the middle class, and rebranded trickle-down are the only serious solutions.

    1. Laughing_Fascist

      Agreed. Yves embarrasses the administration yet again with extreme muckraking journalism. But Obama is immune to humiliation and Lew will be T Sec. Give O an A for consistency.

  13. Laughing_Fascist

    I see a very interesting timeline at work here. Seems that NYU’s payoff in installments of the $1.3m loan to Lew from 2002 to 2007 (according to Lew’s testimony) matches up nicely with the student loan kick backs from Citi to NYU in the amount of $1,394,000 from 2002 to 2007. The latter amount ($1,394k) comes from another Pam Martens story (not the one linked by Yves):

    “While Jack Lew was employed as a Vice President of Operations at New York University, his future employer, Citigroup, was named a “preferred lender.” NYU students were directed to Citigroup for student loans and the company reciprocated with the equivalent of “payment for loan flow,” kicking back to New York University .25 percent of the net loan value directed to it. The University said it used the funds, a whopping $1,394,563 between 2002 to 2007, as financial aid to other students.”

    http://wallstreetonparade.com/2013/02/treasury-nominee-jack-lews-head-spinning-mortgage-transactions/

    Coincidences happen. But when the timeline AND the amount of money involved match up this closely, we may have to consider yet another theory why NYU took the astonishingly extreme action of paying off Lew’s mortgage: that Lew himself was the driving force behind the bizarre decision. “Look man,” he may have said to the trustees each time he signed an NYU check to pay down his mortgage(if he said anything at all to the trustees), “this costs NYU nothing because I got this extra dough from Citi.” Lew earned the payoff of his mortgage with his kickback scheme.

    OK now on to more speculation. Yves slyly threw this in:

    “We will assume the forgiveness of the debt was reported properly to the IRS.”

    Ha ha. You know Lew didn’t. He wouldn’t even pay the interest on the mortgage loan; he wrote an NYU check for the interest (Lew was the check writer over there wasn’t he?). On top of his $840k salary, that loan forgiveness would have been taxable to Lew at the highest tax rate – $several hundred thousand in taxes would have been due over the 5 year payoff period. Either he wrote an NYU check for that as well or he forgot to report the loan payoff as income. No doubt Obama has already directed the IRS to have a look. I’ll read the comics while I wait for the untouchables to get us that answer.

    1. JTFaraday

      You know, I couldn’t even read that article you liked to, so distracted was I by one on the sidebar. But, given that Lew was responsible for a hiring freeze at NYU while he was driving up enrollment to soak students for Citibank and to pay off his house, I guess it’s still on topic:

      “Work is Becoming More Like Prison As Some Workers Forced to Wear Electronic Bands That Track Everything They Do.”

      “The human body, with its need for rest, nutrition and hydration, is such an inefficient tool for capitalist production. But while machines are unlikely to replace human workers anytime soon, new technologies can deftly strip workers of their humanity!

      The Irish Independent reports that grocery giant TESCO has strapped electronic armbands to their warehouse workers to measure their productivity, tracking their actions so closely that management knows when they briefly pause to drink from a water fountain or take a bathroom break. These unforgivable lapses in productivity impact workers’ performance score, which management then apparently uses to terrify them into working faster.”

      http://www.alternet.org/civil-liberties/work-becoming-more-prison-some-workers-forced-wear-electronic-bands-track-everything?page=0%2C0&paging=off

      I bet you thought the ankle bracelets were just for pedophiles.

      (No, college campuses don’t magically materialize the second the permanent students decide to show up, at the last possible second and falling apart like the xerox machine– until the day Goldman Sachs and Rupert Murdoch make it a virtual reality, the self cleaning campus is still just an idle rumor!)

    2. Ms G

      Laughing Fascist, thank you for setting up the timeline. This is one of those cases where it would be unreasonable not to speculate and “all the circumstances” certainly add up to a hella smoke.

      “I’ll read the comics while I wait for the untouchables to get us that answer.” I’m going to borrow this one :)

  14. Hugh

    Here we have the Obama Administration, corrupt, authoritarian, thoroughly corporatist and anti-99%. Lew is a central figure in it. Did any of us seriously think that he was going to turn out to be anything other high priced slime?

  15. Sgt. Friday

    In high school, I have it on good authority, Lew was basically a pink (reddish) diaper baby.

    I guess he changed.

  16. dannyc

    ‘The mechanism was that NYU lent the $1.3 million to buy the house for Lew, and then forgave it over 5 years. Oh, and they paid him the money to pay the interest too.’

    Any one in default or struggling to pay down student debt out there?

    This piece should be in every college newspaper in the country.

    1. JTFaraday

      I remember OWS wasn’t too happy to hear that JP Morgan Chase financed the NYPD assault on their persons.

      …Your tuition dollars at work!

  17. traveler

    Robert Reich is a respected member of the left? But he has nothing worthwhile to say and goes ahead and says it anyhow.

  18. Conscience of a Conservative

    Rubin hid out at Citibank and was protecting his crew waiting for the next Democratic administration. The salary and the reason for bringing Lew to Citi had nothing to do with Citi and everything to do with politics. I doubt Lew did much of anything, at least Rubin acted as a rainmaker introducing the firm to rich clients(we’ll ignore his penchant for poor risk advice)

  19. arcadesproject

    All dishonesty all the time in O-ville? Well yes, perhaps, but he still makes high minded sounds with his mouth. (if you have a tin ear.)

  20. James Galbraith

    I stand by my defense, and restate it here:

    - I worked with Jack Lew when he was on the staff of the Speaker, Tip O’Neill, in the early years of the Reagan era, and our job was to defend the New Deal and Great Society as best we could. At the time I was staff director of the Joint Economic Committee.

    - Since then, Lew’s career has been mainly in government, in demanding senior positions. We have not been in contact, but if his record at OMB or in the White House is tainted, I don’t know of it, and the article here makes no such claim.

    - When I was asked my view, I had no details of Lew’s private employment. I stated that I had a good view of him based on our long-ago collaboration. That remains true.

    - The details of Lew’s private employment, as given above, do not seem to me to be very damning.

    JG

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