So far, the Senate proceedings on President Obama’s nominee for Treasury secretary, Jacob Lew, have been surprisingly free of political fireworks, which could pave the way for a confirmation vote by the end of the week.
The Senate Finance Committee voted in favor of Lew’s nomination on Tuesday morning, 19 to 5, with a floor vote possible by Friday for the former Obama chief of staff, two-time White House budget director, and one-time top policy aide to the late House Speaker Tip O’Neill, D-Mass. Even the Republican ranking member of the committee, Sen. Orrin Hatch, voted for Lew.
Lew is expected to sail through the broader confirmation process, despite Republican attempts to score political points by attacking his investment in a Cayman Islands-based fund (on which Lew says he lost money) and digging into his tenure at Citigroup, where he oversaw a unit that made some of the bank’s riskiest investments and later, benefited from the government’s bailout of big banks.
These rhetorical points will quickly fade if and when Lew assumes the top post at Treasury. Then, he will face a lengthy, complex To Do list, including completion of financial regulations under the Dodd-Frank reform law; playing a leading role on the Financial Stability Oversight Council, which is charged with identifying risks to the financial system; and developing key policies related to U.S. currency and economic sanctions against other countries.
Yet few Wall Street analysts, academics, or Treasury observers say they know where Lew, a longtime budget master, comes down on many of these issues. “I have no sense, none at all,” says Chris Low, chief economist for FTN Financial. “The White House has identified the budget as the toughest fight they’re going to wage. That’s why they picked him. The other stuff becomes quite secondary, but it’s important.”
That will be the test for Lew as he moves into the Treasury Department: getting up to speed on this web of issues, projecting confidence on the international economic stage, and balancing domestic fights over the budget with Treasury’s international role.
“That will be the challenge for him coming out of the block,” says Brian Gardner, senior vice president of Washington research at Keefe, Bruyette & Woods, a small investment bank. “He does not have the same relationships internationally and on Wall Street as Timothy Geithner [the previous Treasury secretary] did.”
One of the most symbolic regulations yet to be released by Treasury is the final version of “Volcker Rule,” perhaps the most visible part of the Dodd-Frank law. Named after former Federal Reserve Chairman Paul Volcker, the rule attempts to reduce the risks that major banks can take by prohibiting them from making certain trades and investments with their own money and for their own gain.
The way Treasury and other bank regulators choose to word the rule—and the types of exemptions they allow—could offer a window into the tone and tenor of Lew’s stint at Treasury and how friendly he would be toward Wall Street. “The Volcker Rule is very controversial because, to many people, it’s a symbol of everything that went wrong during the financial crisis,” says Lawrence White, a professor at New York University’s Stern School of Business. “It will show the consequences of Dodd-Frank, both in terms of symbolism and real effects.”
A spokesman for the Treasury Department declined to comment on the first steps Lew is considering if named the next secretary.
The toughest task for him initially, though, may be splitting his time between domestic issues and broader economic ones—and avoiding the all-consuming yet familiar pull of Washington’s roiling budget wars.
This article appears in the Feb. 26, 2013, edition of National Journal Daily as Lew Looks Like a Lock, but His Policies Are Unclear.