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Democrats took aim at Steven Mnuchin, Donald Trump’s pick to lead the Treasury Department, over his ties to the foreclosure crisis and his initial failure to disclose all his financial assets at his confirmation hearing Thursday.
“In the press it has been said that I ran a foreclosure machine. This is not an accurate description of my role at OneWest bank,” Mnuchin said. “On the contrary, I was committed to loan modifications intended to stop foreclosures.”
Democrats have zeroed in on Mnuchin's investment in sub-prime mortgage lender IndyMac bank, which failed during the financial crisis of 2008. After that, Mnuchin and investors bought the bank from the government and named it OneWest.
His opponents on the Senate Finance Committee are hoping to use the link to the foreclosure crisis to undercut the populist message pushed by President-elect Donald Trump.
Sen. Orrin Hatch, the chair of the committee, began the hearing with a strong defense of Mnuchin, calling any claims his actions helped lead to the financial collapse “lacking in merit.”
Mnuchin may face the stiffest opposition of all Trump’s cabinet nominees as Democrats and liberal groups waged campaigns against his nomination. A day before the hearing, a group of Democratic senators participated in a forum to hear from those who lost their homes after Mnuchin’s bank went under.
Also troubling Mnuchin was the discovery that he failed to disclose nearly $100 million of his assets and his role as a director of an investment fund incorporated in the tax haven of the Cayman Islands in his disclosure forms. Mnuchin attributed the omission to the fact that he tried to get the committee information early and lawyers did not think the information was necessary to include in the complicated forms.
"It doesn't take a rocket scientist to understand 'list all entities,'" Democratic Sen. Robert Menendez said.
Tempers flared even before Mnuchin delivered his opening statement when Republican Sen. Pat Roberts suggested Democratic Sen. Ron Wyden, who delivered a fiery opening statement, take the anti-anxiety drug Valium before the second round of questioning.
“I like Sen. Roberts, but I just can’t quite believe he would say that to a distinguished senator from Oregon,” Democratic Sen. Sherrod Brown shot back.
Mnuchin Defends OneWest: "I'm Proud of Our Record"
Mnuchin was drilled by multiple Democratic senators — and even a member of his own party — about his purchase and management of OneWest. A number of vulnerable Democratic senators up for reelection in 2018 — Sen. Bob Casey of Pennsylvania, Sherrod Brown of Ohio, Bob Menendez of New Jersey and Dean Heller of Nevada, asked Mnuchin about the bank’s foreclosures, including many in their own states.
Mnuchin defended the bank and said OneWest didn’t create the situation and after buying it “the responsibility landed on me to clean up the mess that we inherited.”
"Let me be clear: My group had nothing to do with the creation of risky loans in the IndyMac loan portfolios," he said, noting the buyers invested $1.6 billion in the bank. "We renamed the business OneWest bank and saved thousands of jobs."
But he did acknowledge the bank engaged in some controversial practices. During a testy round of questioning from Brown, where the senator called him “defensive,” Mnuchin didn’t deny that an independent audit of OneWest found it violated the Service Members Civil Relief Act by initiating foreclosures on active duty military families.
“We unfortunately did foreclose on certain people in the military. It was quite unfortunate. It was inappropriate. We responded to those people and made them whole,” he said.“As I said, every single person had the opportunity to have their mortgage reviewed and we corrected any errors. Our errors were less than anyone else…I’m proud of our record.”
He also faced questions over his offshore investments, controversial because they can be used to skirt U.S. taxes. Mnuchin said he used the fund as a vessel to allow for certain investments, not to avoid taxes.
“I, like all other hedge funds and many, many private equity funds, set up offshore entities that are primarily intended to accommodate nonprofits and pensions that want to invest through these offshore entities,” Mnuchin said. “I paid all my taxes as was required.”
Oregon Sen. Ron Wyden, the Senate Finance Committee's top Democrat, said Mnuchin’s bank "put more vulnerable people on the street faster than just about anybody else."
Mnuchin Breaks with Trump on the Debt and the Dollar
Mnuchin split with Trump on a number of the president-elect’s more controversial comments related to the U.S. economy.
He rebutted Trump’s recent comments to the Wall Street Journal that U.S. companies can’t compete with the Chinese because the dollar is “too strong.”
“The currency is very, very strong and what you see is people all over the world wanting to invest in the U.S. currency,” Mnuchin said. “The U.S. currency has been the most attractive currency to be in for a very, very long period of time.”
He went on to describe Trump’s comments on the dollar as short-sighted.
“I think when the president-elect made a comment on the U.S. currency, it wasn’t meant to be a long-term comment,” Mr. Mnuchin says. “It was meant to be that, perhaps in the short term, the strength in the currency as a result of free markets and people wanting to invest here may have had some negative impacts on our ability in trade.”
Under questioning from Democratic Sen. Mark Warner, Mnuchin also broke with Trump’s past comments that he wasn’t concerned about the U.S. debt because he could “renegotiate” it. Mnuchin affirmed that it was important to pay the country’s debts — “we’ve already spent the money […] there should be no uncertainty that we are paying our bills” — and expressed support for raising the debt ceiling “sooner rather than later.”
But the longtime banker belied his lack of experience with public policy when he said he didn’t understand what Warner meant by asking him to commit to a “clean” debt limit hike, or a hike in the limit without any attached policy riders or requirements, which are often used by lawmakers to politicize and delay the increase.
Mnuchin Breaks With Trump on Russian Sanctions; Offers to Investigate Trump Administration
Mnuchin also broke with his boss on Russian sanctions, which he’d implement as Treasury Secretary.
Trump told the Times of London earlier this week that he could propose ending U.S. sanctions on Russia — some newly imposed by the Obama Administration in retaliation for Russia’s involvement in the U.S. election – in exchange for a commitment to reduce their nuclear weapons stockpile.
Mnuchin said he opposes lifting the current sanctions on Russia, and when asked by Democratic Sen. Ben Cardin if he’s committed to enforcing them, Mnuchin said “100%... Where there are sanctions, I assure you that I will use them to the maximum amount allowable by law.”
But he did note Trump’s comments: “The president-elect has made it very clear that he would only change those sanctions if he got, quote, a better deal and we got something in return, whether it was on nuclear arms or other areas,” he says.
He would not say whether there need to be more sanctions on Russia, however, asserting he didn't have all the necessary information to make a decision.
Mnuchin also suggested he could pursue investigations into the Trump administration as Treasurer. Asked by Missouri Sen. Claire McCaskill — a vulnerable Democrat up for reelection in 2018 — about ethics questions surrounding Trump, Mnuchin said McCaskill made a "valid point" about the president-elect's foreign debt potentially being a national security threat.
"If I am confirmed I will research that and get back to you," he said.
And he said he'd investigate allegations that top Trump adviser Anthony Scaramucci may have breached sanctions as an investor.
“Of course, anything you send to me, I will either myself or will make sure my staff properly investigate," Mnuchin said.