Ever since it was announced that Jack Lew, current head of the Office of Management and Budget, would be President Barack Obama’s new Chief of Staff to replace the departing William Daley, the media sphere has been abuzz with Lew’s stellar political resume—having worked for several Congressmen and under both Bill and Hillary Clinton—and the fact that he is described as a “mild-mannered and steady technocrat,” enjoying bi-partisan support.But the incoming chief has another facet to his work history—he’s a former Wall Streeter, and did a stint overseeing hedge funds for Citigroup from 2006 to 2009, and as the Chief Operating Officer of Citi Alternative Investments in his last year there. One of the hedge funds Lew was in charge of at Citi made a windfall in 2008 by shorting mortgage securities, and the the former executive was awarded a $900,000 bonus the year after.
As Alain Sherter at CBS points out, Lew’s Wall Street past isn’t indicative of how he’ll perform in his new duties as Chief of Staff, but does shine light on where possible conflicts of interests may lay.
Another well-kept secret in Lew’s Citigroup career is that he invested in John Paulson, who is famous for making billions shorting mortgages during the crisis. When Lew became COO of Citi Alternative Investments at the end of 2007, one of Citi’s internal funds had $18 million invested in Paulson’s Advantage Plus fund. Within three months of Lew becoming COO, the investment in Paulson had doubled to $41.5 million, The Huffington Post reported in 2010.
Most of Lew’s Wall Street past has already been covered extensively by the media when he underwent a Senate confirmation hearing to become the head of the Office of Management and Budget in 2010. During that hearing, Lew said he did not believe deregulation caused the financial crisis—a striking differentiation from his fellow Democrats, who often cite deregulation of Wall Street as the root cause of the 2008 financial crisis.
According to The Huffington Post, Lew said during the 2010 hearing that “the problems in the financial industry preceded deregulation,” adding that he “personally know the extent to which deregulation drove it, but I don’t believe that deregulation was the proximate cause.”
Lew’s financial history shouldn’t come as a surprise, and actually continues the trending characteristic of Obama’s chief of staff appointments—former chief Rahm Emanuel used to be an investment banker at the now-defunct firm Wasserstein Perella and outgoing chief-Bill Dalley was the head of JP Morgan’s Midwest operations.