Trump's Treasury nominee Steven Mnuchin denies he ran 'foreclosure machine'
Facing opposition from Democrats and consumer activists, Treasury secretary nominee Steven Mnuchin Thursday answered Senate confirmation hearing questions and fended off criticism about his banking career, including thousands of home foreclosures, as he outlined his views on taxes and economic policy.
Emerging poised to win Senate approval, President-elect Trump's pick for the nation's top economic post spent the roughly five-hour Senate Committee on Finance session navigating a difficult straddle.
He portrayed himself as a business champion who will help achieve pro-growth policies Trump has promised will help average Americans, even as he tried to explain how he and wealthy clients legally profited from offshore dealings and other investments unavailable to most people.
"We will work diligently to limit regulations, lower taxes on hardworking Americans and small businesses, and to get the engine of economic growth firing on all cylinders once again," Mnuchin, 54, said in an opening statement as his children, actress fiancée, father, and other family and friends sat behind him.
At the same time, he took on largely Democratic critics, saying that "it has been said that I ran a ‘foreclosure machine.’” He declared, “this is not true."
If confirmed, the multi-millionaire, former Goldman Sachs banker, hedge fund operator, movie industry investor and Trump 2016 national campaign finance chief would lead the department that supervises banks, issues debt securities, and enforces finance and tax laws.
Sen. Orrin Hatch, R-Utah, the committee's chairman, said he expects Mnuchin will be confirmed.
“He has three decades of experience working in the financial sector in a wide variety of capacities," said Hatch.
But the panel's ranking minority member, Sen. Ron Wyden, D-Oregon, voiced skepticism. "When you read about the nominee for Treasury Secretary, given all the power that position holds, you hope not to see phrases like 'foreclosure machine,' 'redlining,' 'offshore funds' and 'predatory lending,'" he said.
Wyden focused on taxation inequality and offshore tax avoidance, issues targeted in recent years by the IRS. He noted pointedly that Mnuchin's financial disclosure records show he has seven personal trusts, including one based in Anguilla and another known as a "dynasty trust," that could shield tens of millions of dollars from taxes.
Mnuchin said he established entities in Anguilla and the Cayman Islands to accommodate non-profits and pension funds that wanted to invest in his hedge fund. "I paid U.S. taxes on all that income" under rules for partnerships, he said..
Mnuchin added that he would "support changing tax laws to make sure they're simpler and more effective."
Separately, he acknowledged that he initially failed to include major personal financial assets — including homes and real estate valued at roughly $95 million — in his federal financial disclosure statement. The assets include a New York City co-op in one of Manhattan's most exclusive buildings, an oceanside vacation home in Southampton and real estate in Mexico — holdings collectively valued at roughly $95 million.
He said his attorney advised that the homes and real estate assets did not have to be disclosed.
Regarding U.S. economic growth, he repeated his earlier predictions "that we should be able to get to 3% to 4% sustained GDP" growth and called the issue his top priority.
Additionally, Mnuchin said he would:
- Deal impartially with Trump's vast business holdings to ensure there are no conflicts of interest.
- Enforce the toughened economic sanctions the expiring Obama administration recently imposed on Russia.
- Examine whether IRS staffing cuts should be restored, look at the agency's "lack of first-rate technology" and support its use of private debt collection.
- Keep the Consumer Financial Protection Bureau, a target of many Republicans, but make its funding dependent on congressional approval.
- Support the Volcker Rule, a post-financial-crisis regulation which largely bars banks from proprietary trading. But he also said the rule "has eliminated liquidity in many banks."
- Oppose big bank bailouts.
- Support a "21st Century" reintroduction of the Glass-Steagall Act, which prohibited commercial banks from engaging in investment banking.
- Try to avoid White House battles with Congress over the U.S. debt ceiling.
The nomination of Mnuchin, dubbed the “foreclosure king” by California anti-poverty and housing equality advocates, has roused opponents leery of handing broad federal power to an executive who made money from the 2008 financial crisis, the kind of cataclysm that Treasury tries to prevent.
After working for 17 years at Goldman Sachs, Mnuchin moved on to start a hedge fund and other investment vehicles, as well as finance films in Hollywood.
The career episode that drew the most focused Senate questioning opened in 2009, when Mnuchin led a group of wealthy investors that bought discounted assets of the failed California lender IndyMac Bank in a loss-sharing deal with Federal Deposit Insurance Corporation. Mnuchin rebranded IndyMac as OneWest, ran it for six years, then sold it, making millions in profits for himself and other investors.
The bank foreclosed on more than 36,000 California families and 24,000 additional households around the country, according to a study of banking data by the Urban Strategies Council, an Oakland-based anti-poverty organization, and the California Reinvestment Coalition, an advocate for low-income areas and communities of color.
On Wednesday, four homeowners who lost or faced losing their homes to OneWest foreclosures appeared at a Capitol Hill forum where they urged Senate lawmakers to reject Mnuchin's nomination on grounds that the bank used improperly aggressive foreclosure tactics..
Citing that criticism during his Thursday confirmation hearing, Mnuchin said he was "maligned as taking advantage of others' hardships in order to earn a buck."
"Nothing could be further than the truth," he responded
Instead, Mnuchin said he and the investor group inherited risky "legacy loans" underwritten by IndyMac.
"The responsibility landed on me to clean up the mess that we inherited," he said. Ultimately, OneWest extended over 100,000 loan modifications to delinquent borrowers, federal records show, but didn't necessarily finalize them.
Neither that tally, nor Mnuchin's answers, satisfied committee Democrats.
"With the combination of extreme foreclosure tactics and a bailout from the FDIC, OneWest became a rainmaker for Mr. Mnuchin and his fellow investors," said Wyden. "At precisely the same time the foreclosure machine was running, OneWest funds were poured into glamorous investments in Hollywood."
OneWest was eventually sold to CIT Group in 2015, and Mnuchin is no longer involved with either company.
Mnuchin will sell investments, quit boards, if confirmed for Treasury
