Jack Lew, the nominee for U.S. Treasury secretary, emphasized his ability to work across party lines as he tried to win over Republican senators who were focusing on his work at Citigroup Inc. and an investment in the Cayman Islands.

Lew, selected by President Barack Obama last month to succeed Timothy F. Geithner, testified at his confirmation hearing before the Senate Finance Committee in Washington today. He said he paid all the taxes owed on the Cayman investment, which lost money.

“I have reached across the aisle to forge honorable compromises my entire professional life,” he said. “The things that divide Washington right now are not as insurmountable as they might look.”

Lew, 57, is Obama’s former chief of staff and was director of the Office of Management and Budget under both Obama and President Bill Clinton. He said the country needs “balanced” deficit reduction that includes more revenue and changes to entitlement programs. It’s that combination of taxes and spending that Republicans reject.

“We’ll be counting on your deep experience to help us achieve comprehensive tax reform,” Finance Committee Chairman Max Baucus, a Democrat from Montana, said during the hearing. Baucus has said previously that he sees no reason why Lew shouldn’t be confirmed.

Citigroup Work

Senator Orrin Hatch of Utah, the top Republican on the Finance Committee, focused on Lew’s time working at Citigroup Inc. and questioned whether Lew could work as the chairman of the Financial Stability Oversight Council as it oversees the so- called Volcker Rule designed to separate proprietary trading from traditional banking.

“If you were to be confirmed, it could lead to an awkward situation in which, in your role as chair of the FSOC, you would effectively be saying to financial firms: ‘Do as I say, not as I did,’ ” Hatch said, adding that Lew was “well-compensated” at Citigroup. “These are not trivial matters. Indeed, they bear directly on your qualifications.”

Lew worked as a Citigroup executive from 2006 before joining the Obama administration at the State Department in 2009. His tenure at New York-based Citigroup overlapped with the U.S. government’s $45 billion bailout during the 2008 global crisis. Citigroup later repaid the government funds.

Bond Funds

Lew served as managing director and chief operating officer of Citi Global Wealth Management. In 2008 he moved to Citi Alternative Investments, which managed billions of dollars in private-equity and hedge-fund investments, some of which were under pressure as the financial crisis neared. A group of the unit’s municipal bond funds lost most of their value that year, placing the bank at the center of a regulatory probe and a wave of litigation from investors.

Lew said he wasn’t responsible for Citigroup’s investment decisions.

Hatch hasn’t said whether he’ll support Lew’s nomination.

Lew, responding to questions from Baucus, said he lost money on an investment in the Cayman Islands and paid any taxes owed. He said he wasn’t aware of the fund’s location when he invested.

Lew had between $50,001 and $100,000 in the Citigroup fund based in the Caymans, according to a 2009 financial disclosure form. He divested from the fund when he took a government position in 2009, he said.

Investment Loss

“My benefit was really very small in the sense that I took a loss when I sold the investment,” Lew said.

Senator Charles Grassley, an Iowa Republican, noted that President Barack Obama has criticized Cayman investments.

“You invested more money there than the average American makes in a year,” Grassley said. “There’s a certain hypocrisy in what the president says about other taxpayers and your appointment.”

Hedge funds often establish investments in Cayman Islands to limit potential taxes for nonprofit and foreign investors.

Grassley also questioned a $940,000 bonus that Lew received in January 2009 as Citigroup was receiving federal bailout funds.

Lew said he was paid like other private-sector employees in similar jobs.

Lew’s Compensation

“I was compensated for my work,” he said. “I’ll leave for others to judge.”

During Lew’s earlier tenure as budget chief under Clinton, the U.S. ran a surplus for three consecutive years.

The tax increases that kicked in at the beginning of this year will help cut the federal government deficit to $845 billion, the first budget gap in five years of less than $1 trillion, the Congressional Budget Office said Feb. 5.

Congress in February froze the $16.4 trillion borrowing limit until May 19 and the country won’t hit the debt limit until several months after that. Lew’s predecessor, Geithner, argued in favor of eliminating the legally set ceiling.

Lew was introduced and endorsed by Senator Charles Schumer, a New York Democrat and Pete Domenici, a former Republican senator from New Mexico.