In the twilight moment between administrations, the poetry of the campaign inevitably gives way to the prose of governing. On the eve of the inauguration, testimony of the Treasury Secretary designate is more of a policy position commitment than when he was nominated in November. Now it counts.
Treasury nominee Mnuchin’s confirmation hearing yesterday before Senate Finance saw numerous important policy pronouncements, commitments and agreements — far more than have been elicited in other confirmation hearings. We inventory these below, as well as instances where agreement was not reached or where the outcome is uncertain. (Watch hearing)
If nothing else, I hope this update can provide distraction from a day many readers worked hard to go differently…
Steven Mnuchin doggedly scheduled private meetings with almost all of the two dozen members of Senate Finance. It showed time and again as the questions and testimony at his confirmation hearing involved a minimum of grandstanding and witness-baiting. No doubt the Senators figured out that Mnuchin wants to transact business, not promote an ideology. His economic growth orientation and laissez-faire baseline are pronounced, but not to the point of being policy eccentric.
Business was indeed transacted at the hearing. Below is a list of major policy areas where the nominee agreed to a position urged by one or more members of the Committee, as well as those areas where he declined to agree or his response is subject to interpretation or clarification (in colloquy with the Senator indicated in parentheses).
• Tax Reform/Fiscal Policy
— Mnuchin Rule — The Ranking Member twice asked the nominee whether he supports the “Mnuchin Rule” that there will be “no absolute tax cuts for the wealthy.” Mnuchin said he was honored to have a rule like Messrs. Volcker and Buffett but agreed to the quoted language, only adding “net net” equivocally at the end. (Wyden)
— Debt Limit — It shouldn’t be a surprise perhaps but still, given his iconoclastic boss, it was a relief to the Committee to hear that the nominee avoid the brinksmanship of Congress’ recent efforts to raise the debt limit. (Bennet)
— Deficits Don’t Matter: Mnuchin accepted without elaboration or defense previously stated fiscal policy plans to increase the national debt by $2-3 trillion, (probably more, unless the CBO adopts dynamic scoring). (Bennet)
— But Offshore Tax Havens Do: Mnuchin agreed to support legislation to. close tax loopholes permitting overseas tax avoidance by US firms (Crapo)
— Border Adjusted Tax: Asked his views on a called the “border adjusted tax” Mnuchin was savvy but agnostic, saying he wouldn’t be surprised if the House passed it though Mr. Trump recently called it “too complicated.” (Wyden)
• Financial Regulation
— Dodd-Frank dismantled? Doubtful that the core — Titles I and II regulating systemic risk and the designated Too Big To Fail financial institutions — of DFA, and certainly improbable that the Act as a whole, would be repealed. (Warner)
— FSOC: Asked point blank if he would repeal the Financial Stability Oversight Council (FSOC) and Orderly Liquidation Authority under Title II, Mnuchin quickly agreed on the former, though he said he could see procedural reforms for the Council. (Sen. Crapo)
— Orderly Liquidation Authority:
The nominee did not find fault with the DFA authority that requires FDIC resolution of non-bank financials and prohibits bailouts.
— Glass-Steagall will not be restored; a “21st Century Glass-Steagall” is possible.
— Volcker Rule: Mend it (it lacks clarity), don’t end it. (Cantwell)
— CFPB: Mnuchin indicated that he would keep the Consumer Financial Protection Bureau, but he would change how it is funded, primarily through government appropriations instead of the Federal Reserve. (Carper)
• GSE Reform
— GSE Privatization: The nominee walked back his earlier statement calling for the privatization of Fannie Mae and Freddie Mac. “My comments were never that there should be recap and release… I believe that these are very important entities to provide the necessary liquidity for housing finance.” (Warner)
— Comprehensive GSE Reform: The status quo of federal government conservatorship of the agencies is “unacceptable” but the leading alternatives on the table represent “two extremes.” (Crapo)
Agreement to Disagree
The nominee rejected appeals for agreement on several key issues. He declined to provide details when Sen. Casey asked what fiscal policy would enable Mnuchin’s promised substantial middle class tax cut. He also refused to state plans regarding the Earned Income Tax Credit (EITC) despite Sen. Wyden’s inquiry.
And although he ruled out repealing Dodd-Frank’s Title II TBTF policy, he did muse aloud that “we need to have proper regulation before the need for Title II goes away” and that he “would not repeal Title II without a bankruptcy solution in place,” which may have been a warning to Warner, one of the Title’s principal and proud authors.