4 Modest Wishes for New Treasury Secretary Jack Lew
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I happily joined the more than 200,000 people who’ve signed the “Paul Krugman for Treasury Secretary” progressive fantasy petition. It was a clever way to tell the administration to reject this nutty austerity craze.
Now, however, President Obama has made the far less exciting choice of his Chief of Staff, Jack Lew, for the job. And especially given the experience with Timothy Geithner over the past four years, it’s time to develop some more modest wishes for the new top dog at 1500 Pennsylvania Avenue.
1. If you were complicit in the 2008 crash, please fess up and make a convincing case that you’ve seen the light.
Lew was the chief operating officer of Citigroup's Alternative Investments unit from 2006 through the crash (he left in 2009) and he should reveal more about what he did there. This should also apply to other top Treasury leaders. Since Lew, a former head of the Office on Management and Budget, is considered more of a budget guy than a financial markets guy, there are rumors that President Obama is planning to install a Wall Street executive as his deputy.
When Geithner was up for confirmation in 2009, Senator Carl Levin asked him to respond in writing to 38 hard-hitting questions. Many of his answers were the evasive inanities you’d expect from someone trying to squeak through a polarized Senate (e.g., “I believe that we need more transparency to promote transparency…”). But the only questions he flat out refused to answer had to do with his role in the Clinton Treasury’s push to deregulate over-the-counter derivatives. The law that resulted, the Commodity Futures Modernization Act of 2000, gave rise to the explosion of credit default swaps that were a key factor in the crash.
We should’ve known then that Geithner was insufficiently reformed. In fact recently he was back at it, exempting foreign exchange derivatives from the new Dodd-Frank regulations over the objections of other regulators and consumer protection groups.
2. If you oppose a popular progressive reform, have the decency to explain your position.
The current deficit fixation could be turned into an opportunity for bold, creative thinking on how to use fiscal policy to shift our economy in ways that would make it more equitable, green, and secure. At the Institute for Policy Studies, we’ve compiled a long list of fair and environmentally friendly proposals that could generate hundreds of billions in additional money per year.
One of our favorites is the idea of a small financial transaction tax that could raise massive revenue while discouraging short-term financial speculation. Over the past four years, much of Obama’s core base – including major labor unions and environmental, anti-poverty, public health, and consumer organizations – have been pushing for such taxes. The International Monetary Fund has documented that they are administratively feasible and could be a significant revenue raiser. The European Commission has also produced reams of analysis on the potential benefits, prompting a dozen European governments to commit to implementing such taxes this year.
Here’s Geithner’s most substantive public statement on the issue: “I have not seen the version of that that I think works.” The Obama Treasury has never published a research paper on the topic. Never offered a thoughtful response to the IMF and European Commission analyses. Never engaged in a meaningful debate. Never even responded to the many civil society letters calling for such taxes.
So Mr. Lew, if you’re confirmed, please at least be open to a respectful dialogue over this and other bold progressive tax and financial reform ideas.