Appearing on Capitol Hill on Thursday, treasury secretary nominee Steven T. Mnuchin defended his leadership of a controversial California bank that has been accused of aggressively foreclosing on homeowners and discriminating against minorities.
Mnuchin appeared before the Senate Finance Committee for his confirmation hearing Thursday morning. In prepared testimony, he argued that he has been “maligned” for his 2009 purchase of failed subprime mortgage lender IndyMac from the federal government. Mnuchin renamed the bank OneWest and ran it for six years, modifying over 100,000 of the country’s most troubled loans and saving thousands of jobs in the process, according to his statement.
“I have been maligned as taking advantage of others’ hardships in order to earn a buck,” Mnuchin said in his prepared remarks. “Nothing could be further from the truth.”
The hearing began with a sharply combative tone before Mnuchin even began speaking — an unusual departure for what is typically a staid and wonkish committee. Chairman Sen. Orrin Hatch (R-Utah) decried “stupid arguments” over Mnuchin’s qualifications to manage the nation’s finances and accused Democrats of obstructing President-elect Donald Trump’s nominees. Ranking member Sen. Ron Wyden (D-Oregon) shot back by accusing Mnuchin of using loopholes in international tax law to shield millions of dollars from taxation.
Republican Sen. Pat Roberts of Kansas then interjected with a suggestion that Wyden take a Valium, an attempt at what he called a “pinprick” of levity. Sen. Sherrod Brown (D-Ohio) objected to the remark, forcing Hatch to gavel the committee to order.
Mnuchin began delivering his testimony nearly 40 minutes after the hearing began, outlining his three-decade career in finance. Mnuchin studied economics at Yale University and began his career at Goldman Sachs before leaving the legendary investment bank to form his own private equity fund, Dune Capital Management. Mnuchin has not previously served in government.
One of his most controversial — and profitable — investment was his purchase of IndyMac from the federal government for $1.6 billion during the depths of the financial crisis — a billion more than the next-highest bid, according to his statement. At the time, many investors were wary of the complicated securities at the center of the housing bust, but Mnuchin said he saw a way to save the ailing bank.
“The responsibility landed on me to clean up the mess that we inherited,” Mnuchin said.
Mnuchin’s spokeswoman has said that 178,000 homes were already in foreclosure when Mnuchin took over the bank. In his prepared testimony, Mnuchin argued that OneWest had little ability to stray from government guidelines in deciding when to foreclose — at one point suing HSBC for the ability to modify loans in trusts that it controlled.
“It has been said that I ran a ‘foreclosure machine,’” Mnuchin said. “This is not true. On the contrary, I was committed to loan modifications intended to stop foreclosures. I ran a ‘loan modification machine.’”
Wyden also took aim at Mnuchin’s complex business interests, which ranged from Wall Street to Hollywood as the financier of blockbuster films such as “Avatar” and “The Lego Movie.” On Thursday, Wyden accused Mnuchin of using loopholes in international tax law to shield millions of dollars from taxation. A memo compiled by Democratic committee staffers obtained by The Washington Post showed Mnuchin initially omitted his ties to a business entity in the Cayman Islands from his financial disclosures. He also failed to include more than $100 million in personal assets, including homes in New York and Los Angeles and real estate holdings in Mexico.
“I’m very troubled about this question of how you’re going to unrig the system if you’ve got a record of taking advantage of tax shelters,” Wyden said.
Mnuchin revised his disclosures after questioning from the committee in advance of his hearing. A spokeswoman said the purpose of amending disclosures is to ensure they are correct.
“In no way did I use [offshore entities] to avoid U.S. taxes,” Mnuchin said Thursday. “I can assure you I pay all my taxes as was required.”
Mnuchin also pledged to reduce regulations that constrain lending, lower taxes and enforce Trump’s trade policies. Mnuchin was instrumental in crafting Trump’s campaign proposal to overhaul the tax code and is expected to have a significant role in pushing the plan through Congress.