Forrest Gump at Treasury



Senate Democrats are in a hurry to confirm Jack Lew as Secretary of the Treasury before anyone notices his biography. Otherwise, liberal lawmakers might be embarrassed voting for a man who represents everything they've been campaigning against.

Investor in Cayman Islands tax haven? Check. Recipient of a bonus and corporate jet rides underwritten by taxpayers at a bailed-out bank? Check. Executive at a university that accepted student-loan "kickbacks" for steering kids toward a favored bank? Check. Excessive compensation with minimal disclosure? Check.

Like a financial Forrest Gump, Mr. Lew keeps walking into the frame of the business-political dramas of the last decade. But unlike the lovable movie character, Mr. Lew is playing the villain of liberal financial lore. One very compelling role, highlighted by Sen. Chuck Grassley (R., Iowa), was Mr. Lew's star turn as an administrator at a university that encouraged students to borrow from his future employers at Citibank.

Prior to working at Citi, Mr. Lew was the executive vice president for operations at New York University from 2001-2006. He was responsible for NYU's budget and finances. During his tenure the university agreed to recognize Citibank as its primary private lender for student loans. Citibank in turn paid NYU 0.25% of the value of the loans.

Mr. Lew and the school say that Citi offered the payments to NYU only after winning a competitive process to offer low rates to students. Mr. Lew says he doesn't recall much about the arrangement, and he responded to a Grassley inquiry by saying, Gump-like, "I do not believe that I approved the selection of Citigroup as C -2.01% a preferred lender for NYU students."

We never thought it was the crime of the century for universities to get a cut of loan revenue when they recommended particular lenders to students. But politicians like Senator Max Baucus (D., Mont.) referred to these payments as "kickbacks." Yes, the same Max Baucus who has spent his career howling about the Cayman Islands. Yes, the same Mr. Baucus who has now forgotten how outraged he is while supporting Mr. Lew's nomination.

Anyway, after Mr. Lew had left NYU to work at Citi, New York Attorney General Andrew Cuomo charged in 2007 that the school's payments from Citi had not been adequately disclosed to students and that the school's policy toward Citi created a conflict of interest and violated state laws. NYU settled without admitting any wrongdoing and agreed to a new code of conduct.

We'd have thought this story would offend principled liberals, but then they're also giving a pass to Mr. Lew's fabulous compensation from the tax-exempt school. NYU students shoulder one of the highest collective debt burdens in the country as they struggle to afford one of the nation's most expensive universities. For those who claim after watching Mr. Lew's confirmation hearing that he doesn't understand finance, we say: Check out his NYU compensation package. He sure knows how to get paid.

According to a 2004 report in NYU's student newspaper, Washington Square News, Mr. Lew was paid $840,339 during the 2002-2003 academic year. This meant that Mr. Lew earned more than most of the country's university presidents that year, including his own boss, John Sexton.

After more Grassley inquiries and reporting by the New York Post, it's not clear whether even that astronomical figure covers all the compensation paid to this employee of an ostensibly nonprofit outfit.

The Post discovered in NYU's IRS forms that the school lent Mr. Lew at least $1.4 million. When Mr. Grassley asked the Treasury nominee about it, Mr. Lew said that the university "provided a mortgage forgiven in equal installments over five years, and an additional shared appreciation mortgage."

Mr. Lew says that NYU reported "income related to housing assistance" on his W-2, so it's possible the loan subsidy was counted in the $840,339 figure. We asked NYU and the Treasury to disclose Mr. Lew's total compensation from the school, including benefits. NYU suggested we review their public tax filings and White House spokesman Eric Schultz said only that, "Mr. Lew has answered more questions than any Treasury Secretary nominee in history. He has been fully transparent and responsive to the Committee and deserves a vote as soon as possible."

What Mr. Lew has told Mr. Grassley is that "in addition" to his salary, he received other benefits, including "a one-time severance payment upon my departure." The website for the Obama Department of Labor notes, "Severance pay is often granted to employees upon termination of employment." That's our understanding as well—severance is typically paid to employees being laid off. But NYU says he left voluntarily.

Why would the school shovel still more money to an employee as a parting gift before he heads off to Wall Street? NYU is a university that gets favorable tax treatment on the premise that it is pursuing an educational mission, not a commercial or political one.

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The Grassley inquiry is unlikely to derail Mr. Lew's nomination, because Senate Democrats, the White House and most of the media really don't care. But Mr. Grassley is doing a public service in revealing how liberals redistribute income to themselves. And Mr. Lew is finally delivering educational value to youngsters by providing a lesson for the Obama era: If you want the big bucks, go into the world of taxpayer-backed enterprises

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