Steven Mnuchin, Treasury Secretary Nominee (Nov. 30)

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Today, President-elect Trump announced that he will tap Steven Mnuchin for Treasury Secretary.  Not a particular  surprise — chair of the Trump campaign’s fundraising team, member of Yale’s Scull & Bones, and an early favorite for the position — Mnuchin and his political and policy views are nevertheless mostly a mystery outside his Wall Street circle.

To fill out this picture, we consider Mnuchin’s career, his preparation to head the Treasury, his chances for Senate confirmation, and what can be discerned about his and Treasury’s policy priorities from tax reform to Dodd-Frank.

Best,

Dana

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Who is Steven Mnuchin?

Mnuchin has deep ties to Wall Street. Throughout his career, he has worked in many of the most important fields and companies in large-scale global finance, and built up a network of connections and friends in this sector.

His resume includes:

  •  Goldman Sachs_Trader:

in 17 years working the fixed-income trading desk at Goldman, leading the divisions of mortgage trading, as well as treasury and other government bonds, Mnuchin eventually rose to become partner and chief information officer before leaving to firm to start his own ventures.

  •  Hedge Fund Manager:

Founder and chief executive officer of Dune Capital, a hedge fund based out of Los Angeles.

  •  Hollywood Impresario:

Film financier and producer, played substantial roles in financing films such as the X-Men franchise and executive producing films like “American Sniper” and “Mad-Max: Fury Road.”

  •  2008 Angel/Vulture Investor

Assembled a group including long-time friend George Soros to buy IndyMac, a California Mortgage provider which failed in 2008 and secured FDIC insurance against any losses on the new venture.

  •  and in Foreclosure:   Mnuchin served as Chairman and CEO of the newly named OneWest Bank.  Under his leadership, the bank expanded rapidly and developed a reputation for aggressive foreclosure during the recession, closing on more than 36,000 homes.  Mnuchin later sold the bank to CIT and doubled his investment; he remains on the bank’s Board.

Though he has extensive Wall Street and business experience, Mnuchin has no political experience — this marks his first  venture into the world of policy.  He has said that his experience working in finance and banking has given him the experience and insight necessary to head the Treasury and that he knows what is needed to boost growth and help small and mid size businesses.

Senate Confirmation:   Highly Likely

Mnuchin seems an odd choice at first blush as Trump’s choice for Treasury Secretary in view of his campaign rhetoric  and populist critiques of the banking and finance industry, particularly hedge-fund managers and Goldman Sachs specifically.  His confirmation hearings will likely make for interesting and important debates on Goldman’s influence, the Volcker Rule and other cornerstones of Dodd-Frank, as well as the role of hedge fund managers and the carried interest loophole.

Mnuchin does face challenges to his nomination.  Democrats plan to hammer Mnuchin on his time at OneWest Bank. Mnuchin faced several suits alleging discrimination in lending.  During his tenure, the bank was notorious for aggressive foreclosures tactics, and was accused of discriminatory lending and foreclosure practices.  Some, including Sens. Sanders and Warren of calling Trump’s appointee, a current hudge fund manager and former partner and Goldman Sachs hypocritical.

  •  Trump’s Campaign Finance:  During his time as chair of the campaign finance team, the campaign was accused of illegally soliciting foreigners, including members of foreign governments. This is a directly violation of FEC rules, and could potentially lead to jail time if found done purposefully by a jury.
  •  Conflict of Interest:  Manuchin could face conflict of interest problems. If H.R. 6392 or a similar bill were to pass, he would be responsible for oversight of regulations on a bank where he is currently a Board member.

But despite these concerns, it is not yet clear that Mnuchin will face any substantial roadblocks in his Senate confirmation.  His appointment has met with favorable reactions from key Republicans and the business community and he appears to have the support needed to carry him at this point.

Secy. Mnuchin:  Policy Implications 

While many of Mnuchin’s positions are relatively unknown, there are several indicators that hint at what economic policy would look like with Mnuchin running Treasury.  Mnuchin has recently described his economic policy as lower taxes, less regulation and fairer trade deals, echoing the President-elect’s ideas and policy proposals.

  •  Taxes:  In a statement today, Mnuchin promised that Trump’s administration will put forward the largest tax cut since Reagan.  Mnuchin was a key architect of Trump’s tax plan, which calls for massive tax cuts that will equal almost $6 billion dollars.  He has also said that he will not rule out tax cuts to the rich, but that they will be off-set by closing loopholes in the tax code
  •  DFA Targets:

—  Risk Retention/ QM Rules:  Manchin has described Dodd-Frank as overly complicated and harmful to lending“ and that his number on priority will be to strip back this provision of the Dodd-Frank Act.  The only provisions of DFA that directly constrain lending activity for policy reasons are the Qualified Mortgage and Risk Retention rules for mortgage originators.  Bank loans have rebounded strongly since enactment of DFA in 2010.

— Volcker Rule:   Mnuchin has said that the Volcker rule is also overly complicated and plans to review the rule after Trump takes office.

—  Title 1/Regional Bank Regs:   Mnuchin has said that he knows how to encourage loans to small and mid scale companies, and that ensuring that banks are lending is going to be a big focus, that the best way to ensure banks are lending is to cut regulation.  He has implied that his time at OneWest also gives him extensive insight into what large regional banks need to succeed and how to encourage lending at that level.

  •  Carried Interest:  As an architect of Trump’s tax plan, it appears that he will be in favor of closing out carried interest, however when questioned about it he has remained neutral and avoided the question.

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