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Feb 17 2013

Trouble for Jack Lew

I have mentioned my concern with the revolving door between government and the private sector (especially between the Treasury Department and Wall Street) and that Jack Lew, currently president Obama’s chief of staff and his nominee to become Treasury Secretary, has some problems in that regard. Now a new problem has cropped up.

It turns out that after his earlier stint in the White House during the Clinton administration, Lew went to work for New York University for six years before he was recruited by Robert Rubin to join Citigroup. Now charges are emerging that while he was at NYU he was responsible for arranging what looks like a sweetheart deal with Citigroup, with allegations of kickbacks.

Jack Lew’s time as an executive at New York University — when the school was accused of steering students to pricey Citigroup loans — is triggering problems for his Treasury Secretary confirmation because he left the school to work for the bank, The Post has learned.

Lew served as executive vice president for operations at NYU from 2001 to 2006 — during which time the school was investigated for making Citigroup a preferred lender in exchange for “sweeteners,” cash and other incentives, according to the New York Attorney General’s office at the time.

NYU settled the probe by returning $1.4 million to students and did not admit or deny guilt.

Lew left NYU for a job at Citigroup.

I think that this will prove to be just a temporary embarrassment for Lew and will not prevent his confirmation. Being very friendly towards Wall Street has hardly been a disqualification for the position of Secretary of the Treasury. If past Secretaries are any indication, it has actually been a plus.

But once again we see the phenomenon of big institutions settling cases, paying fines that are simply added to the cost of business, while not admitting guilt and no one going to jail for wrongdoing, thus allowing the abuses to continue. Furthermore, the lack of a trial means that the public is denied the right to know exactly what happened and who did what.

There is nothing intrinsically wrong with plea bargains. But what we are seeing are deals being offered by prosecutors that are friendly to big businesses and harsh towards ordinary individuals.

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