Jack Lew, current White House Chief of Staff, is often mentioned as a potential replacement for Timothy Geithner.And if selected, Lew will be dealing with the continued fall-out from the financial crisis.
That’s why we dug up the explanation of the roots of the crisis that he gave during his confirmation hearing for head of the Office of Management and Budget in 2009.
Here’s what went down:
Sen. Bernie Sanders (I-VT) asked Lew if he thought deregulation pushed by Fed Chairman Alan Greenspan and Treasury Secretary Robert Rubin in the years leading up the financial crisis “contributed significantly” to the collapse on Wall Street.
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 as 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.
Leaving aside any factual qualms with Lew’s statement (i.e. whether highly abstract derivatives preceded deregulation), the first sentence alone might be enough to disqualify him from the succeeding Geithner. A Treasury Secretary definitely needs to be an expert in this issue.
It’s possible Lew was tired – this was over 90 minutes into his confirmation hearing. It’s also possible this rambling answer was an excuse to avoid criticism of Robert Rubin, his colleague during the Clinton years.
It’s also very possible that Lew truly believes that deregulation did not significantly magnify the financial crisis. See the exchange below:
Business Insider Emails & Alerts
Site highlights each day to your inbox.