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Mnuchin clashes with Democrats over bank he chaired

Steven Mnuchin, Donald Trump’s nominee to be Treasury secretary, clashed with Democrats over the business practices of the lender he once chaired, saying he had been wrongly accused of taking advantage of unfortunate borrowers and that he would work “tirelessly” to boost the economy and US hiring. 

The former banker told the Senate finance committee that he had been maligned and that OneWest, the bank, had extended 100,000 loan modifications to help borrowers that fell behind on their loans. 

Mr Mnuchin’s opening statement to the committee, in which he pledged to lower taxes on small businesses and American workers, came after Ron Wyden, the ranking member of the Senate finance committee, said the former Goldman Sachs banker had shown an “impressive capacity to advantage himself while others fell behind”.

Mr Wyden cited controversies over OneWest’s handling of struggling borrowers following weeks of attacks on the lender’s record by Democrats and progressive activist groups. That argument was disputed not only by Mr Mnuchin but by committee chairman Orrin Hatch, a Utah Republican, who said the bank’s actions had received “high marks” in independent evaluations as he attacked Democrats for seeking to stall confirmations of Mr Trump’s nominees.

Mr Mnuchin’s confirmation hearing opened on a sour note, with Pat Roberts, a Republican from Kansas, telling Mr Wyden that he might want to take a “Valium pill” before continuing with his questioning. The comment prompted an angry response from Democrats. 

Mr Mnuchin, whom Donald Trump has nominated to be America’s 77th Treasury secretary, has faced a barrage of criticism over his six-year spell as chairman of OneWest, a Pasadena-based bank which foreclosed on tens of thousands of homeowners in the wake of the financial crisis. 

Mr Mnuchin portrayed himself as working “tirelessly” to get good results for his clients and shareholders. “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. Nothing could be further from the truth,” Mr Mnuchin said. 

Mr Mnuchin and a group of investors bought the lender, then called IndyMac, in 2008 turning it around. He argues his group was not responsible for the creation of the risky loans in the IndyMac portfolios. “In the press it has been said that I ran a ‘foreclosure machine’. This is not true. On the contrary, I was committed to loan modifications intended to stop foreclosures,” he said. “I ran a ‘Loan Modification Machine’.”

On Wednesday, Democrats including Elizabeth Warren of Massachusetts convened an event with borrowers who said the bank refused to help them when they were struggling to meet their commitments. “Senators voting on this nomination must decide what kind of Treasury secretary Mr Mnuchin would be. Will this economy create jobs and grow wages for all Americans, or will it simply work for those at the top?” said Ms Warren after the meeting. 

Mr Mnuchin had a 17-year career at Goldman Sachs before launching new ventures in fund management and film finance. Mr Trump has turned to a series of Goldman alumni to fill senior posts in his administration, despite his attacks on Wall Street during the campaign. 

Mr Mnuchin, who followed his father into Goldman Sachs, said he started on a folding chair in the bank’s mortgage department before working his way up the ranks amid “many sleepless nights.” 

Mr Wyden painted Mr Mnuchin as one of the powerful and well-connected as he criticised the nominee’s hedge fund for setting up outposts in Anguilla and the Cayman Islands — “an action that can be explained only by the island’s zero per cent tax rate.” 

He went on to attack Mr Trump’s reform platform as a vehicle to offer tax breaks for the wealthy. “Campaign promises about fixing the tax system were just an elaborate head fake,” he said. Mr Wyden also questioned assurances by Mr Mnuchin that any reductions in upper income taxes under the plan would be offset by lower deductions, meaning no absolute tax cuts for the upper class. 

Mr Mnuchin said in his opening statement that he had “great empathy” for the millions of Americans who lost their homes in the financial crisis and pledged to limit regulations, cut taxes on “hardworking Americans and small businesses”, and lift growth. 

Among the other policy issues that may come up in the hearing are how Mr Mnuchin will handle calls for changes to Wall Street regulation, as well as Republican corporate tax reform plans, the US debt ceiling and the Trump administration’s approach to the dollar. Earlier this week, Mr Trump appeared to talk the US currency down, in a sharp departure from the decades-long “strong dollar” policy.

Via FT