Treasury pick emerges smiling from testy hearing

WASHINGTON – Treasury nominee Steven Mnuchin spent 17 years working at Goldman Sachs, part of what President-elect Donald Trump once called the “global power structure” that has “robbed” American workers. Mnuchin’s financial disclosures revealed ties to business entities in tax havens such as the Cayman Islands and Anguilla. Mnuchin managed a California bank accused of aggressively foreclosing on senior citizens – and then sold it for billions of dollars.

In previous presidential administrations, any one of those items might have been enough to sink a Cabinet nominee. But after a testy five-hour confirmation hearing Thursday, Mnuchin emerged bruised but not battered, upbeat and smiling as he left behind a gaggle of reporters to begin the countdown until Trump takes his place in the White House.

“You’ve certainly impressed a lot of people here, especially me,” Senate Finance Committee Chairman Orrin Hatch, R-Utah, told Mnuchin as the hearing wrapped up. “We’re going to help you get through this ordeal. You have friends on this committee on both sides of the aisle.”

Many of Trump’s choices to fill his Cabinet are facing sharp criticism of their records and questions about potential conflicts of interest. But at least so far, none of those potential red flags have emerged as roadblocks to confirmation.

Lanhee Chen, a research fellow at the Hoover Institution who was policy director for Republican Mitt Romney’s presidential campaign in 2012, said he expects all of Trump’s nominees to be confirmed. Many are well qualified for their positions, he said, while criticism of their backgrounds has failed to gain traction.

“We’re in a new era of politics, to a certain degree, that Donald Trump has ushered in,” Chen said. “People are a little more acculturated to these things.”

Those dynamics were on full display as Mnuchin appeared on Capitol Hill to testify before lawmakers. Democrats had sought to portray the veteran Wall Street investor as a prime example of Trump’s backsliding on his campaign promise to rid Washington of special interests and corporate lobbyists – or “drain the swamp,” as his supporters say.

The day before the hearing, Sen. Elizabeth Warren, D-Mass., and other lawmakers held a forum to hear from homeowners who had been foreclosed upon by Mnuchin’s bank. Progressive groups took to the airwaves with ads featuring one borrower who lost her home while her husband battled terminal cancer. Senate Democratic staffers compiled a memo, obtained by The Washington Post, showing that Mnuchin had initially failed to disclose his connection to a business in the Cayman Islands as well as more than $100 million in personal assets.

Even before Mnuchin began speaking, the hearing turned combative among senators making opening statements. Chairman Hatch decried “stupid arguments” against Mnuchin’s qualifications to manage the nation’s finances and accused Democrats of obstructing Trump’s nominees. Sen. Ron Wyden (Ore.), the ranking Democrat on the panel, shot back by accusing Mnuchin of using loopholes in international tax law to shield millions of dollars from taxation.

“The treasury secretary ought to be somebody who works on behalf of all Americans, including those who are still waiting for the economic recovery to show up in their communities,” Wyden said. “When I look at Mr. Mnuchin’s background, it’s a stretch to find evidence he’d be that kind of treasury secretary.”

Sen. Pat Roberts, R-Kan., interjected that Wyden should take some Valium, a medication that acts as a tranquilizer. After Sen. Sherrod Brown, D-Ohio, objected to the remark, Roberts said he was attempting “a pinprick of humor.”

“I’m sorry if I have, you know, incurred your wrath, sir,” Roberts said as the committee returned to order.

At moments, Mnuchin appeared rattled, attempting to talk over lawmakers and plead for more time to answer their questions. At one point, he told Sen. John Thune, R-S.D., to “hang on” as he searched through his notes. And during a tense exchange with Brown over Mnuchin’s role in homeowner foreclosures, Mnuchin pushed back at the lawmaker.

“If you know the answer, why did you ask me?” Mnuchin said. Then he added, “It seems to me, with all due respect, you just want to shoot questions at me and not let me explain.”

After the hearing, Brown said he would not vote to confirm Mnuchin.

Mnuchin graduated from Yale University and began his career at Goldman Sachs before launching his own private equity fund, Dune Capital Management. He made his name in 2009 when he led a consortium of investors to purchase the failed subprime mortgage lender IndyMac from the federal government. He renamed the bank OneWest and sold it to CIT Group in 2015 for $3.4 billion.

Democrats have accused him of profiteering from the financial crisis, but on Thursday, Mnuchin said he was proud of his leadership of the bank. However, Mnuchin said he had little leeway to stray from government guidelines in deciding when to foreclose on homeowners. He noted that at one point, the bank sued HSBC for the ability to modify loans in trusts that it controlled.

Mnuchin’s spokeswoman has said that 178,000 homes were already in foreclosure when Mnuchin took over the bank. On Thursday, Mnuchin said one of the “most troubling” cases involved Nadya Denise Suleman, the California mother of octuplets who became known as the “Octomom.” OneWest foreclosed on her home in 2012, according to news reports.

“The responsibility landed on me to clean up the mess that we inherited,” Mnuchin said.

Lawmakers also scrutinized Mnuchin’s complex business interests. According to the memo compiled by Democratic staff, Mnuchin initially failed to disclose his roles in a business entity in the Cayman Islands. Mnuchin said he did not personally benefit from it but used it to serve nonprofits and pensions.

Mnuchin’s paperwork also initially omitted about $95 million in real estate, including homes in New York City, Southampton, New York, and Los Angeles as well as $15 million in real estate holdings in Mexico. Also missing was $906,556 worth of artwork held by his children.

Mnuchin said Thursday that he had submitted 5,000 pages of paperwork to the committee and that “any oversight was unintentional.”

Mnuchin made few forays into policy during his hearing. He declared that the border tax Trump has repeatedly touted would be narrowly targeted at businesses that offshore operations and sell products back home. He called for reforming the housing finance giants Fannie Mae and Freddie Mac but did not provide a road map for doing so. And he urged consideration of what he deemed a “21st-century Glass-Steagall,” a reference to the Depression-era law that separated commercial and investment banking.

Mnuchin also pledged that Trump’s proposal to overhaul the tax code would not increase the deficit, despite estimates that it could cost at least $2.6 trillion over the next decade.

To avoid potential conflicts of interest as treasury secretary, Mnuchin has said he would divest his assets in 43 companies within 90 days of his confirmation. Hatch had discussed the matter privately with Mnuchin before the hearing.

“I said to you, ‘You’re going to lose a lot of money taking this job.’ And your response was ‘I don’t care. I want to serve my country,’ ” Hatch said. “You’ve made tremendous sacrifices to take this job. I hope my colleagues on both sides of the aisle realize that.”