Senate Finance Committee Chairman Orrin Hatch (R-Utah) went to bat for Treasury Secretary appointee Steve Mnuchin during his confirmation hearing on Thursday, saying claims his businesses helped precipitate the 2008 financial crisis were “lacking in merit.”
Mnuchin, 54, is a hedge fund manager, former Goldman Sachs partner, and former executive with IndyMac and OneWest Banks.
“Mr. Mnuchin had no involvement in the mortgage market in the years leading up to the collapse,” Hatch said. “After purchasing IndyMac and all its toxic mortgage assets, Mr. Mnuchin’s company offered loan modifications to the vast majority of its delinquent borrowers and was one of the very first institutions to make offers to forgive portions of loan principal balances to reduce foreclosures,” Hatch said.
“All independent valuations of the company’s actions have resulted in high marks,” said Hatch regarding the foreclosure practices at OneWest.
Mnuchin, nominated for Treasury Secretary in November, said at that time that he would end the government’s controversial conservatorship of Fannie Mae and Freddie Mac.
“We will make sure that when they are restructured, they are absolutely safe and don’t get taken over again. But we’ve got to get them out of government control,” Mnuchin said back when he was first appointed, according to Bloomberg.
Mnuchin has also said he would roll back key provisions of the Dodd-Frank Act, signed into law by President Barack Obama in 2010 to regulate Wall Street.
During the hearing Mnuchin defended his time at OneWest, saying he worked to help borrowers stay in their homes during the worst years of the financial crisis.
“In the press, it has been said I ran a ‘foreclosure machine,’” Mnuchin said. “On the contrary I was committed to loan modification intended to stop foreclosures. I ran a loan modification machine.
“I am proud to be able to say our bank was able to do over 100,000 loan modifications that allowed people the opportunity to stay in their homes,” Mnuchin said. “Unfortunately, not all the homes were able to be saved through these programs, and despite my best efforts some were sadly subject to foreclosure.”
Mnuchin said he ordered his lawyers to sue HSBC to allow him to do additional loan modifications, and blamed HUD regulations for foreclosures on accounts delinquent by very small amounts.
Ed Delgado, President and CEO of the Five Star Institute and a former executive with Wells Fargo and Freddie Mac, called Mnuchin a “competent choice” for Treasury Secretary.
“His plans to roll back burdensome regulations and advance GSE reform will help foster progress and growth in the industry and the economy,” Delgado said. “He should not be labeled as the architect behind the 2008 financial crisis. The reality is that Mnuchin’s leadership during his tenure at OneWest defended American homeowners by making available programs that offered loan modifications to eligible borrowers.”
Although the committee began the hearing by peppering Mnuchin with questions on his history at OneWest, they soon pivoted to questions on offshore accounts. Senators asked him about his time as director of Dune Capital International Ltd., an investment fund incorporated in the Cayman Islands.
“Did you use the Cayman island corporation to avoid paying taxes? Would you support closing tax loopholes that very wealthy people have consistently used in the Cayman Islands to avoid paying taxes?” Sen. Debbie Stabenow (D-Michigan) asked of Mnuchin.
“There was no benefit to me from the Cayman entity,” Mnuchin replied. “As I said, The Cayman entity was set up to accommodate nonprofits and pension funds that wanted to invest offshore.”
Hatch noted some of the seemingly hypocritical questioning concerning Mnuchin’s corporate involvement with offshore accounts and holdings.
“At least two of president Obama’s nominees who now serve in his cabinet had Cayman Island holdings,” Hatch said.
Wyden said the committee has a bipartisan record of calling out nominees on both sides of the aisle.
Boston Community Capital CEO Elyse Cherry, an expert on foreclosure relief and housing policy, said Mnuchin has a "very different sense of his history" than his detractors.
"In his time there, OneWest took families through about 36,000 foreclosures," Cherry said. "What I would hope is that anybody with that level of knowledge about the real estate industry and the impacts of foreclosure, if he comes into a position in Treasury, would use that knowledge to help us solve the remaining housing crisis as opposed to continuing to throw families out of their homes."
Cherry said she hopes Mnuchin, if confirmed as Treasury Secretary, would use his position to show leadership on a number policies to help homeowners stay in and maintain their homes.
"We need to be able to maintain our housing stock so that people have good, solid, healthy places to live so our neighborhoods can continue to be healthy," Cherry said. "I think Treasury has a lot they can do for that."
Chairman Tim Rood of Washington, D.C.-based business advisory firm The Collingwood Group praised Mnuchin’s handling of the hearing.
“My key takeaway is that Steven Mnuchin is a world-class financier whose decades of experience with financial and monetary matters make him the ideal candidate to serve as U.S. Treasury Secretary and President-elect Trump’s principal economic advisor,” Rood said. “My secondary takeaway is that only the most committed public servant(s) would subject themselves to this gruesome confirmation process."