On Monday the Senate Republicans confirmed Wall Street predator Steve Mnuchin to oversee America’s financial industry. Across the country, bankers and hedge fund managers poured champagne while showing clips of Michael Douglas’ “greed is good” speech from the film Wall Street.
The bankers at Goldman Sachs’ headquarters in New York City were also celebrating. They’ve now scored a trifecta, with former partner Mnuchin approved as Treasury Secretary, former Goldman Sachs president Gary Cohn serving as Trump’s top economic adviser, and one-time Goldman Sachs banker Steve Bannon ensconced in the White House as Trump’s top policy advisor in charge of restoring white supremacy and deporting immigrants. Another Goldman Sachs alum, Anthony Scaramucci, will have to wait awhile before officially joining Trump’s inner circle. He can’t pass the conflict-of-interest ethics test — a very low bar in the Trump administration — because he sold his firm, SkyBridge Capital, to a division of HNA Group, a Chinese conglomate that would become the firm’s majority owner and has close ties to China’s ruling Communist Party.
The Senate confirmed Mnuchin, known as the “foreclosure king” during his days running OneWest Bank, by a mostly party-line vote of 53-47. Only one Democrat, Sen. Joe Manchin of West Virginia, voted with the Republicans. Machnin has received over $1 million in campaign donations from the financial, insurance and real estate industry, according to the Center for Responsive Politics.
As Treasury secretary, Mnuchin will be Trump’s top hit man in charge of dismantling the 2010 Dodd-Frank law that strengthened regulations on the financial industry that have been important checks on Wall Street greed, including the Consumer Financial Protection Bureau, which in its short life has already protected hundreds of thousands of consumers from bank abuse. Mnuchin will also be in charge of overhauling nation's tax code to reduce taxes for his fellow bankers and other wealthy corporate plutocrats.
"Mr. Mnuchin has made his career profiting from the misfortunes of working people," said Sen. Debbie Stabenow (D-Mich). "OneWest was notorious for taking an especially aggressive role in foreclosing on struggling homeowners."
Sen. Sheldon Whitehouse (D--R.I.) said, "I simply cannot forgive somebody who took a look at that banking crisis and took a look at the pain that Wall Street had sent in a wave across all of America, and thought, 'Ah, there's a great new way to make money, foreclosing on people.'"
The Senate Republicans not only ignored Mnuchin’s track record running a “foreclosure machine” and engaging in racist lending practices but also his failure to disclose nearly $100 million in assets on forms he filed with the Senate Finance Committee. Only after questioning by Sen. Ron Wyden (D-Oregon) did Mnuchin acknowledge he was a director of Dune Capital International Ltd. in the Cayman Islands and Anguilla, tax havens often used by rich investors to avoid paying U.S. taxes. Mnuchin was forced to admit that these offshore corporations were little more than post office boxes, with no employees or offices.
Senate Majority Leader Mitch McConnell, R-Ky., voiced the GOP’s see-no-evil approach when he said that Mnuchin "is smart, he's capable, and he's got impressive private-sector experience."
Several weeks ago, Sen. Elizabeth Warren convened a meeting in Washington, D.C. to hear from homeowners who had been victims of Mnuchin’s “private-sector experience.” Warren organized the event because Sen. Orrin Hatch (R-Utah), chairman of the Senate Committee on Finance, rejected a request to invite them to testify at Mnuchin’s confirmation hearing. The financial, real estate, and insurance industry has lined Hatch’s pockets with $2.6 million in campaign donations.
One of the people at the Warren event, Colleen Ison-Hodroff, is an 84-year-old Minneapolis resident whose husband got a reverse mortgage on their fully-paid home through OneWest’s Financial Freedom subsidiary. Within days after her husband died, she received OneWest notification to either repay the reverse mortgage in full or face foreclosure. Another was Heather McCreary, a Nevada mother of two, who lost her home in 2010 after OneWest refused to provide a loan modification. “Steve Mnuchin’s company had no interest in helping us,” said McCreary. “They wanted to foreclose because they were focused on their profits.”
Soon after Trump nominated Mnuchin (who had been his campaign finance chair) for the Treasury post, consumer groups, unions, and community organizations around the country mobilized to oppose his confirmation. They offered similar stories and testimony about the human suffering caused by OneWest Bank’s callous practices under Mnuchin’s leadership. Three weeks ago, the Alliance of Californians for Community Empowerment, a community organizing group, held a vigil outside Mnuchin’s $26 million mansion in Bel Air, a wealthy section of Los Angeles, to draw attention to his terrible track record as a banker.
At the height of the housing crisis, Mnuchin got rich throwing tens of thousands of working people out of their homes. The 54-year old Mnuchin is now worth about $400 million, according to Fortune magazine.
During his presidential campaign, Trump criticized Wall Street bankers for their excessive political influence, attacked hedge fund managers for getting away with “murder” under the current tax code, and claimed that he would self-fund his campaign to avoid being beholden to special interests. “The hedge fund guys didn’t build this country,” Trump said on Face the Nation. “These are guys that shift paper around and they get lucky.”
But now Trump has tapped Mnuchin and other Wall Street insiders for top positions, guaranteeing that the financial industry will get its way unless Democrats and grassroots organizations mount fierce opposition.
Trump’s earlier rhetoric aside, he and Mnuchin are a good match. Prior to his appointment, Mnuchin was CEO of Dune Capital Management, a hedge fund that had business dealings with Trump.
Both Trump and Mnuchin earned their first fortunes the old fashion way: they inherited it. Trump took over his father Fred’s real estate empire and expanded it through corrupt and rapacious business practices. Mnuchin, also the scion of a wealthy and well-connected family, graduated from Yale in 1985 and soon wound up working at Goldman Sachs, where his father Robert had been a general partner.
Both Trump and Mnuchin have run businesses accused of widespread racial discrimination and they both represent the excessive wealth and greed of the billionaire developer and banker class. And both men have hedged their political bets, donating big bucks to Democrats as well as Republicans.
Indeed, Mnuchin’s entire life is a tale of privilege and profit.
After graduating from Yale, Mnuchin went to work at Goldman Sachs, following in his father’s footsteps. He spent 17 years at the bank, where he eventually became an executive vice president. According to the Wall Street Journal, he left in 2002 “at the age of 39 with a reported $46 million stake in the bank.” He left the bank and went on to head several hedge funds.
In 2009, Mnuchin assembled a group of investors (including computer capitalist Michael Dell, financier George Soros, private equity investor Christopher Flowers, and hedge fund titan John Paulson) to buy the troubled IndyMac Bank from the Federal Deposit Insurance Corporation (FDIC) as part of a sweetheart deal. They renamed it OneWest Bank and kept its headquarters in Pasadena, CA. They persuaded the FDIC to reimburse the billionaires bankers for much of their costs for foreclosing, a policy called “lost share” that shielded the bank from risk. Mnuchin moved to Los Angeles to run the bank.
A 2013 memo from prosecutors in the California attorney general’s offices, leaked to the media two weeks ago, revealed “evidence suggestive of widespread misconduct” by OneWest under Mnuchin’s helm.
In 2009, after the housing bubble burst, the Obama administration launched a program to encourage banks and their mortgage servicers to help borrowers stay in their homes by modifying their mortgages to make them more affordable. But about three-quarters of homeowners who sought modificiations from OneWest were denied. OneWest was among the worst performing large servicers in the program by that measure.
Instead, soon after Mnuchin bought the bank, One West went on a foreclosure frenzy. The California Reinvestment Coalition (CRC)—a nonprofit organization that pushes banks to reinvest in low income communities and communities of color—determined from Freedom of Information Requests that the FDIC had already paid out over $1 billion to reimburse OneWest for the cost of over 35,000 foreclosures in California and many other foreclosures in other states. The bank made a tidy profit on each foreclosure. “On bad loans, OneWest, which bought many of the loans at 70 percent of par value, gets the cash from a foreclosure,” according to the Los Angeles Business Journal, “and is also reimbursed up to 95 percent of the difference between the original loan value and the foreclosure sale amount.”
Many of those foreclosures were illegal. Some OneWest employees accused the bank of encouraging fraudulent behavior, including widespread “robo-signing” – signing off on foreclosures without verifying information or closely examining the documents. Some observed that the bank illegally backdated mortgage documents.
Moreover, a CRC and Urban Strategies Council analysis of One West’s 35,877 foreclosures in California from April 2009 to April 2015 found that 68 percent occurred in zip codes where the non-white population was 50 percent or greater.
In a complaint filed with the U.S. Department of Housing and Urban Developmen, the CRC accused OneWest of engaging in redlining by giving few mortgage loans to African American and Latino consumers, failing to locate branches in communities of color, and doing less maintenance on foreclosed homes in neighborhoods of color than white ones. Only two of OneWest’s 73 branches are located in low-income areas. During Mnuchin’s reign as CEO, it made few small business loans to businesses with annual revenues under $1 million—the kind of operations common in low-income and minority areas.
CRC executive director Paulina Gonzalez called OneWest Bank “a leader in foreclosing on seniors,” many of whom have reverse mortgages—loans that provide cash payments to help homeowners realize value from the equity in their homes and become payable when the borrower dies or moves—insured by the Federal Housing Administration. OneWest was responsible for 16,200 foreclosures on government-backed reverse mortgages, or 39 percent of all foreclosures nationwide, from 2009 through late 2014, even though it only serviced about 17 percent of the loans, according to government data analyzed by the CRC.
OneWest also serviced billions of dollars of mortgage loans on the behalf of third parties, such as Fannie Mae. In multiple surveys of California housing counselors, OneWest was ranked among the worst mortgage servicers in the state.
In 2014, Mnuchin arranged to sell OneWest to the CIT Group for $3.4 billion—more than double what his group paid for the bank five years earlier. Bloomberg calculated that he may have made more than $200 million from the sale. Mnuchin also received a nearly $11 million severance package when he resigned from CIT’s board on top of more than $20 million in total pay. Under the terms of the acquisition, CIT agreed to pay Mnuchin $4.5 million a year for three years as the bank’s vice-chairman. After he relinquished that post last, Mnuchin was given a $10.9 million severance package, according to the Wall Street Journal.
Despite Mnuchin’s confirmation, consumer and community groups have pledged to organize to thwart his and Trump’s agenda of dismantling consumer protections.
“While we’re surprised and disappointed that senators would vote for him after he refused to provide honest answers, CRC, our members, and our allies aren’t going anywhere,,” said the CRC’s Gonzalez. “We are ready to continue the fight against Wall Street greed.”
“There were nearly 8,000 OneWest foreclosures here in Los Angeles,” said Isela Gracian, president of the East LA Community Corporation, a nonprofit group that builds affordable housing and provides counseling to homeowners to help them avoid foreclosures. “We are ready to ensure that he doesn’t continue to do harm to working class families and that the US economy serves all of us, not just Wall Street.”
Peter Dreier is professor of politics and chair of the Urban & Environmental Policy Department at Occidental College.