Jacob Lew, President Barack Obama's nominee for Treasury secretary, is urging Congress to avoid steep automatic spending cuts that are set to take effect on March 1, saying they threaten the broader economy.
The $85 billion in cuts would impose "self-inflicted wounds to the recovery and put far too many jobs and businesses at risk," Lew told the Senate Finance Committee Wednesday.
The committee is considering Lew's nomination to succeed Timothy Geithner, who stepped down last month as Treasury secretary. Lew, who most recently served as Obama's chief of staff, is expected to win Senate confirmation late this month.
During the hearing, Lew faced sharp questions from Republicans about his tenure at Citigroup during the 2008 financial crisis. He was also pressed about a nearly $1 million bonus he received while the bank was being bailed out by taxpayers.
Several senators wanted to know more about Lew's brief time serving as chief operating officer for Citi's alternative investments unit. He took the job Jan. 2008 and held the position during the peak of the financial crisis, when Citi received a $45 billion bailout from the federal government. He left in early 2009 to join the Obama administration.
Lew's unit had been criticized for making risky investments that imploded during the crisis. Lew told the panel that he did not make decisions about investments during that time.
"I was not in the business of making investment decisions," he said. "I was aware of what was going on, but I wasn't designing" the investment funds.
When pressed about a $940,000 bonus he received in early 2009, Lew said he was then an employee of the private sector.
"I was compensated for my work," Lew said. "I'll leave for others to judge."
If confirmed, Lew will need to turn his attention immediately to the proposed cuts to both defense and domestic spending programs. But many other challenges await him. He also would have to manage tense relations with China, press Europe to reduce debts while fighting a recession and defend the financial overhaul law.
Still, the job isn't quite as perilous as the one that greeted Geithner, who had to help stabilize the U.S. banking system after the worst financial crisis since the 1930s and help lift the economy out of the Great Recession.
The economy and banking system are far healthier now. Still, Lew will likely have to marshal all his strengths as a budget specialist and perhaps overcome inexperience in some areas to achieve significant success.
Lew, 57, is well-prepared for questions about taxes and spending. He has twice served as a White House budget director — once during the Clinton administration and once under Obama before becoming his chief of staff.
Going back to his days as an aide to House Speaker Tip O'Neill in the early 1980s, Lew has amassed three decades of experience at the top levels of Washington policy-making.
He isn't expected to have trouble winning Senate confirmation, despite the likely arguments from Republicans that the administration isn't doing enough to contain "entitlement" programs such as Medicare, Medicaid and Social Security whose costs are straining the federal budget.
After Wednesday's hearing, committee members will have two days to send questions to Lew to answer before they vote. The full Senate could vote on the nomination late this month.
That would give Lew little time before his first budget challenge — the March 1 date when deep spending cuts in defense and domestic programs will kick in unless Congress and the administration agree on some way to avert them.
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