Sobel Plays Bad Cop as Treasury’s Lew Debates G-7 Austerity

The world’s top finance officials meeting last month were trying to commit jointly to reducing debt until Mark Sobel, a mid-level U.S. Treasury official who rarely speaks in public, led the charge to kill the effort.

Instead, the Group of 20 statement -- hammered out in 13 hours of talks in Washington -- focused on the need to spur hiring and growth, a theme pushed by Treasury Secretary Jacob J. Lew and his boss, President Barack Obama.

Sobel, deputy assistant secretary for international monetary and financial policy, will again be working behind the scenes when Lew meets today and tomorrow in Buckinghamshire, U.K., with counterparts from advanced economies. Lew will urge finance ministers from Europe, Canada and Japan, known as the Group of Seven, to spur demand and refrain from imposing fiscal austerity too quickly, a Treasury official said May 8. The ministers’ task is to “nurture the recovery,” U.K. Chancellor of the Exchequer George Osborne said before the meeting.

“Senior Treasury officials can count on Mark Sobel to play the role of the U.S. Treasury bad cop, allowing them to come in with a softer glove,” said David Loevinger, a former senior coordinator for China affairs at the Treasury who joined investment manager TCW Group Inc. in Los Angeles last year as an analyst. “Mark has been known to ruffle some feathers.”

Europe’s recession is emerging as the main topic of discussion for Lew and fellow finance chiefs as they seek new ways to rally lackluster global growth.

Sobel, who has worked at the Treasury since 1978, when Jimmy Carter was president, is part of a group of influential career officials who have worked in the administrations of both parties to shape U.S. international economic policy.

‘Institutional Memory’

These employees are “the institutional memory” of the Treasury’s international affairs office, Lael Brainard, the office’s undersecretary who was nominated by Obama, said in an interview. “They also have the ability to adjust from one stripe of administration to another stripe of administration seamlessly.”

Sobel, 58, is known at the Treasury and among his foreign counterparts as a tireless and at times uncompromising negotiator who has been the key U.S. representative at meetings of G-20 and G-7 finance officials in the aftermath of the U.S. and European financial crises. The G-20 includes China, Brazil, Russia and other developing nations.

While Sobel “may not be the most popular foreign official” around the world, Loevinger said, “he is among the most respected.”

Late Nights

At a G-20 meeting in Moscow in February, the bespectacled Sobel trudged out of the Manezh convention hall near Red Square at 6:15 a.m. after 22 hours of talks. He returned to his hotel briefly to shower before another set of meetings with Brainard started at 7:30 a.m.

The officials ended up agreeing not to target exchange rates for competitive purposes and that Japan should have room to stimulate its stagnant economy as long as it didn’t publicly advocate a falling yen.

“There is a lot of detail in some of the communiques, and you have things you want to achieve and things you don’t want to happen,” Sobel said in a May 3 interview at his Treasury office. “You have shifting coalitions around the room. So you have to be on your toes.”

Sobel grew up in Missouri and Florida, attending Florida State University in Tallahassee before transferring to Princeton University in New Jersey. He received a master’s degree from Johns Hopkins University’s Paul H. Nitze School of Advanced International Studies in Washington.

FSU Supporter

Whenever a Treasury international affairs employee or spouse has a baby, Sobel, a staunch supporter of Florida State athletics, gives them an FSU bib, a former department official said.

Sobel estimates that he works 70 to 80 hours a week in Washington when he’s not on one of about 10 foreign trips he takes each year. Treasury employees know that if they can’t find Sobel in his office, he’s probably on one of his late-afternoon runs to Starbucks on 14th Street, a block from department headquarters.

“His hobby is his work,” said Domenico Lombardi, a former member of the executive boards of the IMF and World Bank and now director of the global economy program at the Centre for International Governance Innovation in Waterloo, Ontario.

“He’s a tough cookie,” Lombardi said. “You really have to do your homework if you’re debating him. It’s difficult because he knows all the technical details and understands the political sensitivities. He is unique in that.”

Trademark Backpack

Sobel is known for his ability to memorize the history of arcane instruments such as the Exchange Stabilization Fund, an emergency Treasury reserve. The style of his statesmanship is more function than fashion: He has traveled from meeting to meeting, including at least one with Obama, with a backpack slung over his shoulder.

Loevinger said Sobel is one of three or four people in world “who truly understand the financial plumbing” of the International Monetary Fund, the world’s lender of last resort that has participated in bailouts from Indonesia to Ireland.

At last month’s G-20 meeting in Washington, finance ministers haggled over the right balance between the need for fiscal austerity in a time of growing public debt, and the need to shore up a slowing global economy.

“We’re concerned about the prolonged deficiency of demand in the euro area,” Brainard said in the May 2 interview. “It was important to make a very strong statement that the focus is on growth and employment, and you’ll see that sentence very strongly, and that’s what that debate was really about.”

Growth Emphasis

In the end, the G-20 said in its communique, “we reaffirmed our determination to raise growth and create jobs.” That language largely reflected the U.S. view pushed by Sobel.

The administration “was very ably represented by Mark,” Brainard said. “If there was a sense of contentiousness it’s because it’s a genuinely important debate about what’s the right strategy for the world going forward right now.”

The discussions resume today and tomorrow in Buckinghamshire, about 45 miles (72 kilometers) northwest of London, where Lew will stress the need to focus on stimulating demand and creating jobs in countries such as Spain, where the unemployment rate exceeds 27 percent.

The pinnacle of Sobel’s authority came as acting undersecretary in 2009, when Brainard had not yet been confirmed by the Senate and then-Treasury Secretary Timothy F. Geithner didn’t have a full contingent of international affairs officials.

‘Darkest Hour’

Geithner and Sobel, who have known each other since working together at the Treasury more than two decades ago, helped push to increase the IMF’s lending capacity by $750 billion at a G-20 summit in London in April 2009. The announcement helped assuage investor fears about a meltdown in emerging markets during what Sobel called “the darkest hour of the global downturn.”

More recently, the European debt crisis and other flareups around the world have thrust other longtime Treasury bureaucrats into weighty roles.

Since the Arab Spring uprisings began in 2010, Andrew Baukol, 49, deputy assistant secretary for the Middle East and Africa, has developed U.S. strategy to aid financial stability in the region. William Murden, head of the international banking and securities markets office, worked with Sobel after the 2008 financial crisis on a 47-point plan to improve financial regulation that became part of an agreement reached at the first summit of G-20 leaders in November of that year.

Treasury’s Team

Asia specialist Robert Dohner has been the point man pushing China to allow the yuan to strengthen. Brussels-based attache Susan Baker and Mathew Haarsager, director of the Treasury’s office of international monetary policy, are among those promoting the U.S. emphasis on growth. Meg Lundsager, who started at the Treasury in the 1980s and is now the U.S. representative on the IMF executive board, advocates the administration’s views on issues from Cyprus to Argentina.

Brainard said Lundsager is an “invaluable resource” because her relationships with IMF and foreign officials go back three decades.

For a career employee in international affairs such as Sobel, years of work across different administrations can help build relationships with foreign officials.

Sobel was a “vigilant and friendly partner” when France held the presidency of the G-20 in 2011, said Ramon Fernandez, head of the French Treasury, who has known Sobel since the late 1990s. “He defends his positions vigorously but without being aggressive.”

Sobel said he isn’t a lone ranger and gets orders from higher-ranking Treasury officials before and during meetings, when he checks his BlackBerry for instructions. If the G-7 talks go long this weekend, he’ll be ready.

“I can stay awake for 22 hours and do this, because the adrenaline flows and you have to be paying attention,” he said.

Before it's here, it's on the Bloomberg Terminal.