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The Next Treasury Secretary Doesn’t Trust Wall Street With His Own Money


Jacob Lew's financial disclosure reveals a low-cost, low-management investment strategy. Lew (left) is President Obama's nominee to replace Treasury Secretary Timothy Geithner (right). (AP Photo/Susan Walsh)()

Jacob Lew, the White House chief of staff whom President Obama nominated to replace Timothy Geithner as Treasury secretary, is considered a change of pace for the department: He is known as a budget wonk and political fixer, not a financial-markets expert like Geithner.

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Despite, or perhaps because of, a lucrative stint at Citigroup as senior operations manager for one of the bank’s riskiest units, Lew’s 2011 financial disclosure form (pdf), helpfully pulled from the bureaucracy by our own David Yanofsky, reveals an investment strategy predicated on low-cost, low-management assets that don’t divert a lot of money to bankers’ pockets.

Most of his retirement investments, between $600,000 and $1.3 million, are managed by TIAA-CREF, the nonprofit organization originally founded by turn-of-the-20th-century tycoon Andrew Carnegie to provide for the retirement of teachers. (The disclosure form doesn’t specify actual sums, just ranges.) Nowadays, TIAA-CREF is a massive asset manager, but it is still a nonprofit focused on people in “service” professions—teachers, academics, researchers, etc. Lew likely began taking advantage of the organization’s low-cost offerings during his career as a congressional staffer.

The bulk of his remaining investments, $266,000 to $665,000, are in low-cost index funds. Rather than pay high fees for fund managers, Lew has purchased exchange-traded funds that invest in a broad range of equities, rising and falling with the markets. These kinds of investments are increasingly popular for investors looking for profit at a time of scarce returns: After all, an investment in an S&P 500 index 10 years ago would have significantly outperformed an investment in hedge funds during the same period. 


Does he trust Israel’s fiscal management more than America’s? Unlikely, but Lew likely owns far more Israeli government bonds than U.S. Treasuries (though some U.S. bonds may be part of his TIAA-CREF retirement funds). Lew is an Orthodox Jew known for his observance of the Sabbath, so it’s probably no surprise that he has made a significant investment in support of Israel’s government. Then again, maybe it’s a commentary on the admired monetary policy of Stanley Fischer, the governor of Israel’s central bank, who also supervised Federal Reserve Board Chairman Ben Bernanke’s Ph.D. thesis.

As more retail investors are becoming cognizant of the high cost of management fees in a low-interest-rate world — see online broker E-Trade’s new ad campaign highlighting just that — Lew may be ahead of the curve. Too bad he’s likely to be too busy figuring out this whole debt ceiling mess to bring that attitude to financial regulation.

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