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WSJ Editorial Page Assistant Editor James Freeman on Jack Lew’s work at Citigroup and its impact on his potential confirmation as Treasury Secretary...
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Treasury nominee Jack -- prepares to secure his seat our next guest -- found some questionable dealings with his past that are worth bringing up at his hearings.
Joining us now is James Freeman he's assistant editor of the Wall Street Journal's editorial page -- -- to Syria if there -- he joined Citigroup probably the worst possible time in January of 2002008.
Right before -- when he takes over what's called Citigroup's alternative investments unit which show really was ground zero in the mortgage crisis.
Really about the most troubled part of what was one of the most troubled too big to fail banks this was this was by the way the alternative investment some people called toxic investments -- a lot of anger -- and and then treasury guy -- secretary Geithner began to call.
They lost this one division lost 358.
Million dollars while he was there correct that was -- of the end of his first quarter on the job so I'm not a not an outstanding performance and actually got even much worse after that but they ended up shutting the unit and didn't report its results separately so.
The losses were much greater and ultimately.
Citi later that year gets.
Series of bailouts 45 billion in taxpayer cash.
Taxpayer guarantees on hundreds of billions of other dollars of their assets and it's really it's among the biggest bailouts of the crisis here.
Isn't it fair to say though that most of the bad decisions most of decisions to buy into the MBS is in the other toxic instruments the sub prime loans were made before he arrived on the on the alternative investments unit that's definitely a fair statement -- the question I think mr.
Lou is gonna have a tough time responding to is.
What do you understand about when you went to work there were you up.
-- -- oblivious to these risks in which case we wonder whether your role as treasury -- -- allow you to to spot risks in the rest of the rest of the financial system.
Or -- you aware of them and just didn't say anything.
Well did he do anything to clean up the -- It's been -- very hard to find any evidence but he did anything at all but when you talked to up the White House people who worked with mr.
Lou it's basically.
A long list of denials of things he had responsibility for its very hard to figure out what he actually did.
Well as treasury sector -- god help us we -- he may be called upon at some point.
To initiate other bailouts who knows what kind of crisis we might may or may not get into over the next four years.
If he does -- could he be charged by people don't agree with that with conflict of -- Well I think this is what you worry about we've just come through this period where.
Big banks were bailed out there's there's kind of it -- Simmering anger among Americans still about crony capitalism now here we have a guy from one of those bailed out banks really among the worst actors on Wall Street.
Amazingly up for the job of Treasury Secretary.
Four short years later so I -- yeah.
-- at that time of the you have an initial bail outs back in 2000 I was.
I was -- Hank Paulson his connection with Goldman Sachs of course he was -- former head of Goldman Sachs they they benefited from the bailouts and I think it is a fair criticism you've you've made may have to it he may have to actually recuse himself from some of those decisions now.
Well I think a billion -- Treasury Secretary you know you want an understanding of finance he wants all of who understands finance but is not who understands Wall Street but is not a creature rather than -- I think what you worry about were or captive of that you might say.
You you do worry about the relationships here given that this bank.
Is supported by taxpayers over and over again when it runs into trouble is there really -- to be traded.
Harshly.
As in -- -- if it fails again.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- And that this is before we before -- NYU and it's similar to the city era where it's you're trying to figure out what exactly did this guy didn't there for what is up fairly large paycheck at that -- is it.
NYU it's a nonprofit academic institution.
He's paid over 800000 dollars to 800 -- 40000 dollars and -- if I'm -- what's now more than what the president -- and the president president -- NYU and more than the president most universities in the country and what did he do for that money well it was and -- even as the executive vice president for operations so he oversaw human resources.
Some of their construction projects.
But it's similar to say any wow that's a big paycheck bigger than the president and the university and and why is someone -- a tax exempt institution getting paid 840 grand a year.
It's good work if you can get a James Freeman from the Wall Street Journal good -- you could hear things that lifts.
