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U.S. President Barack Obama is keeping a trend alive with new White House Chief of Staff Jacob Lew.
You see, Lew has something in common with his predecessors: He spent years raking in millions on Wall Street.
Like William M. Daley, who on Monday resigned from his post as chief of staff, and Rahm Emanuel, who vacated the position in 2009 to successfully run for mayor of Chicago, Lew has strong ties to the financial sector. Until 2009 he was the chief operating officer of Citigroup Alternative Investments, which made money betting against the housing market with controversial credit default swaps.
Lew also told the Senate during his 2010 confirmation hearing that he does not think financial deregulation contributed to the housing market crash.
Now he holds one of the most powerful positions in the country.
Lew's appointment is the latest example of Washington's symbiotic relationship with Wall Street. A job on the Street can often lead to a political position of power – and a high-level spot in Washington can land someone a cushy job in the financial industry.
At the very least it's alarming that President Obama, who has been repeatedly criticized for not doing more to rein in the U.S. financial services industry, was so eager to welcome another Wall Street insider to his inner circle. The new appointment raises concerns that needed financial reforms will be overruled or cast aside.
New Chief of Staff Jacob Lew: the Latest Wall Street Export
Lew currently heads the White House Office of Management and Budget (OMB), and will assume his new post at the end of the month. Lew served as OMB director under former President Bill Clinton from 1998 to 2001.
Lew's Citigroup Inc. (NYSE: C) days started in 2006 when he led a proprietary trading group for the bank. He oversaw hedge fund investments that bet on the housing market collapse.
The Citi division lost billions when housing went bust, but Lew walked away with full pockets. His 2009 bonus was roughly $900,000.
Lew's predecessor, Daley, was a JPMorgan Chase & Co. (NYSE: JPM) executive who in 2010 made $8.7 million from the company, and at one point held $7.6 million in JPM stock. Daley also worked in Washington before heading to Wall Street, serving as the U.S. secretary of commerce under President Clinton from 1997 -2000.
Emanuel held the chief of staff spot from January 2009 to October 2010. He ventured into the finance industry in 1998, leaving his role as a senior political aide to departing President Bill Clinton for the Chicago investment boutique Wasserstein Perella & Co. Emanuel was named a managing director in 2009 and earned more than $18 million in two-and-a-half years.
When President Obama first chose Emanuel as his chief of staff, the newsletter Hedge Week reported Emanuel would make sure the financial sector was represented in Washington.
"At a time when hedge fund managers feel particularly friendless, it cannot hurt to have someone who understands their business in the heart of the White House," the newsletter wrote in 2008.
Lew isn't the first to jump from budget leader to the Street, either. His predecessor as budget chief, Peter Orszag, joined Citigroup as the vice chairman of global banking when he left Washington.
As the revolving door between Wall Street and Washington continues to spin, its effects on financial reform have many consumer interest groups concerned.
"It is chilling that during the most intense time for the soul of American banking that Obama would choose a Volcker Rule-related hedge fund manager as one of his chief advisers," Bart Naylor, an analyst at Public Citizen, which has lobbied on financial reform, told The Huffington Post.
News and Related Story Links:
- Money Morning:
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- International Business Times:
Who is Jacob Lew? Like Predecessors, Obama’s New Chief of Staff has Financial Industry Background, Ties
- Hedge Week:
Emanuel's appointment offers reassurance to hedge fund industry
- The New York Times:
In Banking, Emanuel Made Money and Connections
- New York Observer:
Jacob Lew, Obama’s New Chief-of-Staff, Will Not Please Occupy Wall Street
- The Huffington Post:
Is Jack Lew's Bank Background Bad News For Financial Reform?