On January 25, Timothy Geithner stepped down from his position as the current secretary of the U.S. Treasury. President Obama has appointed Jack Lew to take his place, but there is a question of what this decision will mean and what Lew will bring to the table. Geithner is known as someone with a strong familiarity with banking regulation. Lew is an attorney by trade who once worked at Citigroup but has a lot of political experience as the White House chief of staff. No one expects him to diverge from the administration’s agenda but much about his impact remains unknown.
“Who is Jack Lew?”
It is always fun to speculate on how people will react when given the mantle of leadership. In such circumstances, even those wielding swords may decide that the best approach is to turn them into plowshares. Having said that, however, the appointment of Jack Lew to replace Tim Geithner cannot be viewed as a positive for the banking industry. Although Tim Geithner was far from an industry advocate (despite Sheila Bair’s assertions otherwise), he did seem to have a concern about the effect of regulation on the economy. In contrast, Jack Lew appears to be a person firmly committed to the president’s populist agenda. Accordingly, even the ability to have a conversation with people in power on the excesses of the rulemaking process may no longer be there.
— Peter Weinstock, Hunton & Williams, LLP
Critics of Dodd-Frank, and of regulatory reform in general, are likely to find little daylight between Jack Lew and his predecessor on the need to timely and thoughtfully implement the reforms that were proposed by the Obama Administration during the financial crisis and ultimately adopted by Congress in 2010. And so for the administration’s current approach to bank regulation, it appears safe to say that Lew’s appointment signifies a continuation, not a shift. Then again, if Lew’s unique signature is any indicator,a series of loops that will grace the U.S. dollar if he is appointed, perhaps he will surprise us all.
— Mark Chorazak, Simpson Thacher & Bartlett LLP
The appointment of Jack Lew?who is a lawyer rather that a capital markets person?will have only marginal impact in the near term on bank regulation. Since bank regulation has not been a principal focus of Lew, it is likely that he will rely heavily on staff at the U.S. Treasury and the bank regulators appointed by President Obama. That said, he is a quick study and financially savvy, so he will develop his own policies on bank regulatory matters as he confronts the issues that come at him. Some of those may be implemented through the Financial Stability Oversight Council (FSOC), which he will chair. But again, our experience with FSOC suggests that its very competent staff will continue the processes that are under way to reach Systemically Important Financial Institution (SIFI) designations in due course.
— Thomas Vartanian, Dechert LLP
While Jack Lew’s positions on the broad range of current issues including the Volcker Rule and Basel III are as yet uncharted territory, his first-hand experience in political maneuvering and negotiating will stand him in good stead as the new chair of FSOC. With Geithner as chair, FSOC did not accomplish much. With a surer and more politically savvy hand on the tiller, however, we can expect increased activity (including, at the outset, designation of certain nonbank entities as SIFIs and the establishment of new rules for money market mutual funds). Traditionally, the bank regulators, like the Office of the Comptroller of the Currency (OCC) and the now-defunct Office of Thrift Supervision, have been known to engage in turf wars to expand their own authority, and the Treasury secretary has not typically been able to wield much influence. The politicization of the regulatory framework wrought by Dodd-Frank, however, may significantly redraw the landscape of agency territoriality. Thus, the Securities and Exchange Commission may not so readily be able to ignore Lew if, as FSOC chair, he pushes strongly for money market reforms.
— Keith Fisher, Ballard Spahr LLP
Lew has banking experience, but Geithner had unparalleled exposure to bank regulation before he became secretary. I expect that Lew will continue the administration’s program and positions with respect to bank regulation, as reflected in Dodd-Frank.
— Donald Lamson, Shearman & Sterling LLP