Mnuchin adds to mixed signals over Trump dollar policy
Treasury secretary nominee faces Senate grilling on his finances and banking record
Donald Trump’s nominee for Treasury secretary has reasserted US support for a strong dollar, adding to conflicting signals over the incoming administration’s economic policy as he sought to clarify comments by the president-elect that hit the currency earlier this week.
Steven Mnuchin, a former Goldman Sachs banker, told a Senate confirmation hearing on Thursday that a strong currency remained important over the long-term, reflecting America’s attractions as an investment destination.
On Monday Mr Trump appeared to break from decades of strong-dollar policy in the US by saying that the level of the currency was too high and was preventing American companies from competing with Chinese counterparts.
Mr Trump’s observation had not been meant as “a long-term comment”, Mr Mnuchin said, but instead reflected some potential concerns about the short-term effects of a strong dollar, including the risk of it having a negative impact on trade.
Asked about the dollar, Mr Mnuchin said “the long-term strength over long periods of time is important. And again, I believe that’s a reflection of, I believe, we have the most attractive investment environment in the world. We have to protect our US companies so they’re not forced abroad.”
Speaking before the Senate Finance Committee, Mr Mnuchin said he would not be commenting about short-term currency movements as Treasury secretary. But the mixed signals being sent by the Trump camp highlight the risks of the president-elect confusing markets with his freewheeling style, as well as uncertainty over the new administration’s economic priorities.
Mr Mnuchin was speaking in a fractious confirmation hearing that focused on his own finances as well as the lending practices of a bank he formerly chaired.
The nominee has come under fire from Democrats for his background in banking as they seek to portray him as being out of touch with ordinary Americans and callous in his dealings with struggling mortgage borrowers.
Democratic Senate staff circulated a memo before the hearing showing gaps in Mr Mnuchin’s financial disclosures. According to the memo, obtained by the FT, these included positions as director of Dune Capital International Ltd, a Cayman Islands entity, other shell companies, nearly $100m of real estate and over $900,000 worth of artwork held by his children.
Senator Robert Menendez of New Jersey said it did not take “a rocket scientist” to get the disclosure forms right and argued that by moving entities to tax havens Mr Mnuchin had helped people and organisations avoid taxes. Mr Mnuchin said the late disclosures had been an oversight and stressed the complexity of the forms he had filled in.
Mr Mnuchin defended the location of some of his vehicles in tax havens, saying he did not use the venues to avoid personal tax and that it was primarily to accommodate pension funds and non-profit institutions. Challenged by Democratic senators about the use of such havens, Mr Mnuchin said he would support changes to tax laws to make sure they are simpler and more effective.
In recent weeks Mr Mnuchin has come under repeated attack from Democrats and progressive activist groups over foreclosure practices at OneWest, the bank he used to chair.
Commenting on his record as chairman of OneWest, he told the Senate finance committee that he had been maligned and that the bank had extended 100,000 loan modifications to help borrowers who fell behind on their loans.
However Ron Wyden, the ranking member of the Senate finance committee, said the former Goldman banker had shown an “impressive capacity to advantage himself while others fell behind”.
That argument was challenged not only by Mr Mnuchin but by committee chairman Orrin Hatch, a Utah Republican, who said the bank had received “high marks” in independent evaluations as he attacked Democrats for seeking to stall confirmations of Mr Trump’s nominees.
Mr Mnuchin and a group of investors bought the lender, then called IndyMac, in 2008, turning it around. He argued his group was not responsible for creating 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’.”
Mr Mnuchin spent 17 years 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 islands’ 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.
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.