Courtesy of Pam Martens.
As questions swirl as to why New York University, a nonprofit subsidized by the taxpayer, used endowment funds from its law school foundation to provide Treasury Secretary nominee Jack Lew with more than a million dollars in mortgage loans in 2001 and a $685,000 “severance” payment when he voluntarily left to accept a high paying job at Citigroup in 2006, the name of John Sexton has emerged as someone who was in the know about the dealings.
As the document below confirms, Sexton, who has been President of NYU since 2001, signed off on the first $1,300,000 mortgage loan to Lew on August 22, 2001. The second mortgage loan by NYU to Lew in the amount of $150,000 was made later that same year. Lew has said in written testimony to the Senate Finance Committee that NYU forgave portions of the first loan and reimbursed him annually for any interest that was charged. According to tax experts, that doesn’t pass the smell test for an arms-length, market rate loan. According to nonprofit governance experts, giving any kind of a loan to a director or executive of a non-profit is an ill-advised slippery slope.
Before becoming President of NYU, Sexton served as Dean of the NYU Law School for 14 years. He joined the Law School’s faculty in 1981 following graduation from Harvard Law School, magna cum laude, in 1979. He certainly should understand the law.
Sexton is also a member of the Council on Foreign Relations, a think tank which just hired Timothy Geithner, who stepped down recently as Treasury Secretary, opening the door for Jack Lew’s nomination to the post. The Council on Foreign Relations’ Co-Chairman is Robert Rubin, the former U.S.Treasury Secretary under Bill Clinton. When Rubin left the Clinton administration, after helping to repeal the depression era investor protection law known as the Glass-Steagall Act, enabling Citigroup to become a casino housing speculative stock businesses as well as insured deposit accounts, Rubin proceeded directly to a Board post at Citigroup and earned $120 million over the next eight years as a senior advisor to the firm.
Citigroup collapsed into the arms of the U.S. government with a bailout that exceeded $2.5 trillion, including equity infusions, assets guarantees and loans from the Federal Reserve Bank of New York from 2008 to 2010. Sexton served as Chairman of the New York Fed from 2004 to 2006 and Deputy Chair in 2003. Sexton’s reign at the New York Fed overlapped with fellow New York Fed Board member, Sandy Weill, former CEO and Chairman of Citigroup. The New York Fed was the chief regulator of the holding company of Citigroup. While Sexton was Deputy Chair of the New York Fed in 2003 and Weill was on its Board, Weill sold back to Citigroup $264 million of his Citigroup shares which he had obtained under stock awards. The shares were sold on October 2, 2003 at a price of $47.14. Since that time, Citigroup’s shares have lost over 90 percent of their market value.
Weill held the distinction of one of the most obscenely paid executives on Wall Street but, nonetheless, was allowed to serve on the Board of his regulator, the New York Fed. In just a five year period, Weill received compensation of $785 million. He stepped down as Chairman of Citigroup in 2006 and the firm spiraled toward collapse just two years later.
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