Washington — Jacob Lew, President Obama’s nominee to be treasury secretary, is facing questions about his compensation as an executive at New York University and his participation in a “preferred lender” arrangement between the college and his subsequent employer, Citigroup.
In a series of questions submitted last week, Sen. Charles E. Grassley, Republican of Iowa, asked Mr. Lew about his role in setting tuition and determining endowment payouts. During Mr. Lew’s five-year tenure as executive vice president for operations at NYU, from 2001 to 2006, the average tuition and fees paid by students increased nearly 40 percent.
Mr. Grassley, a longtime critic of colleges’ endowment spending and executive-compensation policies, asked what Mr. Lew, one of NYU’s highest-paid employees, had done to “keep tuition under control.” Citing data from The Chronicle’s executive-compensation survey, the senator pointed out that Mr. Lew had earned more than the president of the university and a dean, and more than most college presidents at both public and private institutions.
The senator demanded details about a loan that the university had provided Mr. Lew and asked whether laws governing nonprofit institutions should be changed to limit executive compensation. He pressed the nominee on how endowment growth had factored into tuition decisions, noting that NYU’s endowment had increased nearly 60 percent, to $1.7-billion, while Mr. Lew was there.
In a series of responses released by the senator on Wednesday, Mr. Lew said that his salary had been set in an employment agreement that he signed when he joined the university, and he noted that his pay rose only 5 percent over five years. The loan, he explained, was a mortgage forgiven in equal installments each year.
Mr. Lew, who is expected to be confirmed by the Senate, said he had not had the opportunity to review federal executive-compensation rules, and described steps he had taken to manage costs, including instituting a hiring freeze, reforming procurement practices, and developing a standard procedure for business travel.
He said the university drew down $109-million from its endowment in its current operating budget, but he did not say how much it had withdrawn during his tenure, or whether endowment growth had influenced pricing decisions. He rejected Mr. Grassley’s suggestion that colleges be required to pay out 5 percent of their endowments annually, saying a minimum payout “could harm the long-term viability of an endowment during periods of economic stress,” a concern shared by many college leaders.
The senator also grilled Mr. Lew about a “preferred lender” arrangement that the university previously had with Citigroup, where the nominee went after he left NYU. Under the terms of the arrangement, NYU received $1.4-million in “revenue sharing” from Citibank for referring students to its loans. Citibank broke off the deal in 2007, after reaching a settlement agreement with New York’s attorney general at the time, Andrew Cuomo. Mr. Grassley asked whether Mr. Lew knew of the agreement and if he had approved it.
Mr. Lew said that Citigroup had been chosen through a competitive process and that he did not recall having any conversations with Citigroup about its bid. He said he did not believe he had approved its selection as a preferred lender, either.
In a written statement, Mr. Grassley said Mr. Lew had not provided adequate details about the terms of his loan from the university and said he would request more information before the committee votes on the nomination.
“Mr. Lew’s boss, the president, continually expresses concern about college affordability,” Senator Grassley wrote, “so it’s important to know whether Mr. Lew enjoyed financial perks as a university executive even as students weathered tuition increases and debt.”Return to Top