Tuesday, January 10, 2012

No Change At Chief Of Staff

The horrendous Bill Daley of J.P. Morgan Chase has resigned as Obama's Chief of Staff. His goals were to "rebuild" Obama's relationship with the business community and work with congressional Republicans. Heckuva' job.

He is being replaced by Jacob Lew, a former Citigroup executive.

I didn't know banking experience was needed to be a chief of staff, but there you go. But in fairness to Lew, he isn't just any banking executive, he's an unbelievably shady one. Glenn Greenwald:
In 2010, Lew became head of the Office of Management and Budget when Peter Orszag left and then, a couple months later, accepted a multi-million dollar position as a high-level Citigroup official. Lew has spent many years in various government positions, but he has his own substantial ties to Citigroup. Here is what Lew was doing in 2008 at the time the financial crisis exploded, as detailed by an excellent Huffington Post report from last year:
[Lew] oversaw a Citigroup unit that profited off the housing collapse and financial crisis by investing in a hedge fund king who correctly predicted the eventual subprime meltdown and now finds himself involved in the center of the U.S. government’s fraud case against Goldman Sachs. . . .
[I]t is his few years at Citi — in particular the one year he spent at its then-$54 billion proprietary trading, hedge fund and private equity unit — that’s likely to raise the most eyebrows in the coming weeks as Lew faces a Senate confirmation hearing.
Especially his unit’s investments in a hedge fund that bet on the housing market to collapse — a reality suffered by millions of American homeowners.
In particular, the Citigroup fund run by Lew, Citi’s Alternative Investments, invested heavily in the hedge fund of John Paulson, “who made billions off the deterioration of the housing industry by making bearish bets on securities tied to home mortgages — particularly subprime home mortgages.” One of Paulson’s largest bets at the time involved Goldman Sachs, which the SEC has now charged with “defrauding investors by creating and selling exotic securities tied to subprime home mortgages in 2007 without disclosing that they were handpicked by a hedge fund [Paulson] that was betting on them to fail.”

Although these bets turned a profit for Citigroup as the housing market collapsed — a collapse that led to the foreclosures of millions of Americans’ homes — Lew’s unit “lost as much as billions of dollars in 2008 as its bets turned sour. In the first quarter of 2008 alone the unit lost $509 million; the company stopped publicly disclosing the unit’s individual numbers soon thereafter, but the part of the company that absorbed Alternative Investments lost $20.1 billion in 2008, according to the bank’s filings with the Securities and Exchange Commission.” As a result of that and other losses, Citigroup received $45 billion as part of the Wall Street bailout, and also used a crisis-created FDIC program to issue another $64.6 billion in taxpayer-backed debt. All of that led to these comments when Lew was chosen last year to replace Orszag as OMB Director:
Lew’s role at the fund is raising some eyebrows among good government groups.
“That sounds pretty nasty, doesn’t it?” said Gary Bass, executive director of OMB Watch, a group that monitors the budget office. “Any activity and any player that contributed to the economic calamity needs to be looked at.
“We already got enough players in this administration that certainly were key players in the economic malaise that we currently have,” Bass continued. “Why shouldn’t we have another one?” he said with a slight chuckle.
For his work at Citigroup, work that included betting on the housing collapse, Lew received a salary of $1.1 million. After Citigroup received its $45 billion taxpayer bailout, Lew — two weeks before joining the Obama administration — received another $900,000 from Citigroup as a bonus. This was revealed only in 2010; in 2009, when Lew first joined the administration as a State Department official, both he and the administration refused to say if he had received a post-bailout bonus from Citigroup (at the time, there was a huge political scandal over Wall Street executives receiving large bonuses despite needing taxpayer bailouts). There’s certainly nothing illegal about betting on a housing market collapse, but it’s quite symbolic that those who made millions of dollars from the crisis are now running government policy.

Lew (like so many key Obama officials) also participated in the orgy of Wall Street de-regulation that took place in the 1990s when he served as Clinton’s OMB head; after leaving Citigroup to join the Obama administration, he unsurprisingly said in response to questioning from Sen. Bernie Sanders that he does not believe deregulation contributed to the financial crisis.
Rahm, Daley, Lew. If they're anything this administration has been consistent on, it's making sure a corporate whore is the gatekeeper for the president.

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