Treasury pick defends foreclosure actions, asset disclosure

Treasury pick defends foreclosure actions, asset disclosure (Photo by Office of the President-elect [CC BY 4.0)

WASHINGTON—Steven Mnuchin, President-elect Donald Trump’s pick as Treasury secretary, clashed with Democrats during a lengthy confirmation hearing Thursday over his handling of thousands of mortgage foreclosures and his failure to initially disclose to the committee nearly $100 million in assets and interests in a Cayman Islands corporation.

Mnuchin said the failure to disclose the assets was an oversight that he had corrected when it was brought to his attention by staffers of the Senate Finance Committee. He said he had followed the advice of a lawyer who believed the disclosures were not necessary.

But Democrats seized on the issue as evidence of serious ethics challenges among Trump’s Cabinet nominees.

“Never before has the Senate considered such an ethically challenged slate of nominees for key Cabinet positions,” Senate Democratic leader Chuck Schumer said in a statement.

In the hearing, Democrats on the Senate panel challenged Mnuchin’s explanations, suggesting it was because he did not want to reveal his involvement in a business that could be used as an offshore tax haven. Mnuchin said he had never used the Cayman Islands to avoid paying taxes.

After the hearing, Senate Finance Committee Chairman Orrin Hatch, R-Utah, predicted to reporters that Mnuchin will get confirmed and indicated he hoped to have a committee vote next week. But one Democrat, Sen. Sherrod Brown of Ohio, announced that he planned to vote against Mnuchin.

“Mr. Mnuchin’s cozy ties to Wall Street raise serious red flags that demand serious answers,” Brown said in a statement.

Not surprisingly, Mnuchin’s performance drew praise from President-elect Donald Trump. At a luncheon in Washington, Trump said Mnuchin was “getting grilled” by the committee but “he’s doing a fantastic job.”

Mnuchin, one of many wealthy business executives Trump has picked for his Cabinet, told the Senate panel that he had turned over 5,000 pages of documents to the committee and that some of the questions were complicated.

According to a memo written by the Democratic staff on the committee, Mnuchin did not initially disclose $95 million in real estat— a co-op in New York City, a residence in Southampton, New York, a residence in Los Angeles and $15 million of real estate in Mexico. In addition, Mnuchin initially failed to disclose $906,556 of art work held by his children, the memo said.

The memo said that following meetings with committee staff, Mnuchin amended his disclosure forms and also disclosed his position as director of Dune Capital International in the Cayman Islands, the site of many offshore tax havens.

When pressed by Democrats to explain the omissions, Mnuchin said, “I did not use a Cayman Island entity in any way to avoid taxes for myself. There was no benefit to me.”

Democrats also attacked Mnuchin’s record when he ran OneWest bank, saying he failed to do enough to keep people from losing their homes. All of the criticism on the committee came from Democrats. Republicans widely praised Mnuchin’s record in business, indicating their support for his nomination.

During the hearing, Mnuchin defended his handling of thousands of foreclosures during the height of the financial crisis, saying he had worked hard to assist homeowners to refinance so they could keep their homes.

“Since I was first nominated to serve as Treasury secretary, I have been maligned as taking advantage of others’ hardships in order to earn a buck,” he said in testimony. “Nothing could be further from the truth.”

Mnuchin, a former Goldman Sachs executive, was questioned about his actions after taking over the failed IndyMac, whose collapse in 2008 was the second biggest bank failure of the financial crisis. Mnuchin assembled a group to buy the bank from the government, renamed it OneWest and turned it around, selling it for a handsome profit to CIT Group Inc. in 2014.

Mnuchin denied press reports that said he ran a “foreclosure machine.” He told the Senate Finance Committee that his bank extended over 100,000 loan modifications to borrowers who had fallen behind in their mortgage payments.

But several Democratic senators raised examples of residents in their own states who they said were not treated fairly in dealing with OneWest, including elderly homeowners, members of the U.S. military and one example of a person who lost their home although they were behind in their payments by less than $1.

Mnuchin said that not all of the bank’s decisions on foreclosures had been correct.

“To the extent there were any errors, I am sorry for that,” he said.

Mnuchin at various times was offered the chance to clarify statements that Trump has made on such issues as the value of the dollar and whether it would ever make sense to default on the government’s debt. Mnuchin said that the administration believed over the long-term that a strong dollar was a major benefit to the country. He said threats to default on the government’s debt as a negotiating ploy in budget negotiations was a bad idea.

Mnuchin’s supporters include Finance Committee Chairman Orrin Hatch, R-Utah. He called Mnuchin a “leader and a manager through his career, demonstrating an ability to make tough decisions and to be accountable.”

Mnuchin, who as Treasury secretary would serve as the administration’s chief economic spokesman, also faced questions about Trump’s ambitious plans to double the country’s growth rate through tax cuts, reduce government regulations and boost government spending on infrastructure projects.

During the campaign, Trump also vowed to target countries including China and Mexico that he contended are pursuing unfair trade practices that have cost millions of U.S. jobs. He has said one of his first actions after taking office will be to label China a currency manipulator. It would be Mnuchin’s Treasury Department that would make that finding.

Mnuchin worked at Goldman for 17 years, making partner in 1994 and overseeing the firm’s mortgage trading desk before becoming chief information officer. He left Goldman in 2002 and, after running an investment fund set up by billionaire investor George Soros, he and two former Goldman colleagues set up a new hedge fund, Dune Capital Management in 2004.