JONATHAN CHAIT MARCH 4, 2010
The Wall street Journal reports today that Lee Sachs, a counselor to Treasury Secretary Tim Geithner, will be leaving the administration in April. Since the early days of the transition in 2008, Sachs has generally been the senior Treasury aide in charge of overseeing the administration’s response to the financial crisis. As I reported in this profile last summer, Sachs was a leading internal proponent of the view that nationalizing the megabanks would be counterproductive, potentially destroying the value of the seized institutions while leaving the government on the hook for hundreds of billions in losses. Among other things, he helped persuade the president and senior White House aides of this view at a critical seven-hour meeting last March.
Sachs's departure signals Treasury’s view that the crisis phase of the recent turmoil is behind us, and that the department can proceed on a more normalized, day-to-day footing. Though Sachs remains a highly influential aide, with a portfolio that touches everything from regulatory reform to debt management, Geithner leaned most heavily on him during the transition and the early days of the administration, when the joke around Treasury was that there were only three people in the building--Geithner, Sachs, and another counselor, Gene Sperling. In fact, Geithner may soon be without both of these top lieutenants, as Sperling is a top candidate to become deputy OMB director. The hope is that the Treasury secretary will instead be able to rely more on the department's formal bureaucracy, though that’s complicated by the fact that several senior officials, including two nominees for under secretary positions, are bogged down in the Senate for little apparent reason.
In Sachs’s absence, another senior Treasury aide, Matt Kabaker, is expected to play an even bigger role on financial matters. Kabaker, a former managing director at The Blackstone Group, is in his early 30s but revered for his intelligence and poise. According to one source, Blackstone CEO Stephen Schwarzman has referred to his intellect as a “four-standard-deviation event”—which is the way finance types often describe a 100-year-storm (though in fact I think a four-standard-deviation event is much rarer…). A former Treasury official once told me there were frequently moments during the dark days of the financial crisis when a meeting of senior aides would last until midnight, at which point someone would have to write up a detailed memo for the White House. Kabaker would invariably volunteer to stay up all night banging it out, then show up at the office bright and early the next day. “Throwing himself on the grenade” was the phrase this official used.
So Treasury’s financial team will be in eminently capable hands. How much it misses Sachs’s stature and sage counsel, to say nothing of his influence with the White House, is another question.
For more on Sachs’s critical role defusing the financial crisis, please see the aforementioned profile.