There are plenty of signs that Steve Mnuchin is not a good guy, even by the lax standards of today’s banking industry. OneWest, a bank he established with partners and ran from 2009 to 2015, mounted a record of ruthless foreclosures (in one case over a 27-cent error). A memo from top prosecutors in California’s state attorney general’s office saw evidence of its “widespread misconduct” and repeated violations of law, according to The Intercept. Mnuchin misled the Senate (accidentally, he says) on his banking history, his personal finances and his role in running a Cayman Islands tax-haven account.
Nevertheless, Senate Republicans just managed to confirm Mnuchin as the next Secretary of the Treasury.
Republican senators like Rob Portman of Indiana used contorted logic in an attempt to convince voters that Mnuchin did not mislead them, while Mnuchin attributed his failure to list $100 million of his own assets in his disclosure forms to “oversight.” (If you’re rich enough to overlook $100 million, it’s safe to say you’re very rich.)
Mnuchin will run a department that once reprimanded him and OneWest, requiring them to work with an independent monitor. His areas of responsibility will include “supervising national banks and thrift institutions” and “enforcing Federal finance and tax laws.”
‘It Takes One to Catch One’
Aggressive bankers have held high office before, and it hasn’t always ended badly. Joseph P. Kennedy Sr. had a reputation for playing rough and cutting corners, at a time when banks were largely unregulated and unsupervised. Kennedy was also said to have smuggled moonshine during Prohibition, but no evidence of that has ever come to light. (Kennedy, like Mnuchin, invested heavily in show business and did well.)
When Franklin D. Roosevelt appointed Kennedy to serve the first chairman of the Securities and Exchange Commission (SEC), FDR was reportedly asked why he had appointed such a crook. “Takes one to catch one,” Roosevelt is said to have replied. By all accounts, Kennedy did an excellent job.
But there was a major difference between Joe Kennedy’s outlook and Steve Mnuchin’s. Kennedy understood that Wall Streeters were rascals who needed strict oversight. Mnuchin wants to go easy on them.
‘Way Too Complicated’
Mnuchin wants to loosen regulations on the bankers whose misbehavior and massive fraud cost the economy trillions of dollars in lost income in the 2008 financial crisis. He used the same phrase to describe both the Dodd-Frank law, which took some needed first steps toward reining in predatory bankers, and the “Volcker rule” limiting banks’ ability to gamble with federally insured deposits. “Way too complicated,” he complained.
To paraphrase what Sen. Lloyd Bentsen told Dan Quayle when he faced him in a vice presidential debate: Steve Mnuchin, you’re no Joe Kennedy.
During his confirmation hearing, Mnuchin said he now supported the Volcker rule, although he said it needed to be “improved” in ways he did not describe. He also said he supported some version of a “21st century Glass-Steagall Act” to separate commercial banking from the speculative and often high-risk world of investment banking. But again, Mnuchin offered no specifics.
Mnuchin is part of a wave of former Goldman Sachs bankers joining the Trump administration, just a few short months after a campaign in which Trump vilified Goldman Sachs as representing the worst aspects of American finance.
Assuming that his confirmation proceeds as expected, Mnuchin and Trump — together with Mnuchin’s ex-Goldman Sachs colleagues — will work with a Republican-led House and Senate that shares a basic antipathy to banking regulation and has increasingly diverted Wall Street campaign contributions from the Democrats.
A Resistance Roadmap
How can Americans resist Wall Street’s influence over the government with Trump in the White House, Mnuchin at Treasury and Republicans controlling both houses of Congress? There will be many strategy discussions in the weeks and months to follow, but some basic principles seem clear:
Remind voters that this is a government of the wealthy, by the wealthy and for the wealthy: Trump managed to convince a number of (mostly white) working-class voters that he had their interests at heart. Then he packed his administration with self-interested billionaires. Many of their economic moves are likely to benefit their own portfolios, while hurting the wallets of working Americans. Voters must understand that the GOP’s billionaire-packed cabinet has turned the government into a tool and plaything for the rich.
- Defend Social Security: The Treasury secretary serves as the managing trustee for Social Security’s trust funds, which held more than $2.8 trillion in reserves at the end of last year. Trump promised during his presidential bid that he would not cut Social Security. That made him stand out from the Republican field and helped him win the presidency. Voters must demand that Trump keep that promise, and that Mnuchin use his position to defend the program from direct cuts to its benefits — or the indirect cuts that would result if Medicare’s benefits were reduced and seniors had to pay more out of pocket.
- Hold senators accountable for confirming Mnuchin: If Mnuchin is confirmed, it will he because Republicans ignored both the evidence of his misdeeds and his “oversights” before the Senate. Voters must hold the GOP accountable for every misstep Mnuchin makes in office.
- Press them to keep their promises: Trump repeatedly promised to invest in American infrastructure. If he and Mnuchin offer only tax breaks for corporations or private “partnerships” that strip the American people of their own resources, they must be challenged on it. If Mnuchin reverses his support for the Volcker Rule and Glass/Steagall, he must face a grilling on Capitol Hill. If Congress fails to do its job, voters should press lawmakers to get it done.
The Dodd-Frank law was a useful first step toward reining in bank criminality, but it didn’t nearly go far enough. The Obama administration’s failure to prosecute crooked bank executives gave a green light to ongoing fraud. If Mnuchin and Trump repeal or roll back some of the regulations now in place, as seems likely, brace for more fraud in the future. That will increase the risk of another financial crisis, at a time when inequality is growing and the middle class is disappearing. Altogether, it’s a recipe for disaster.
Only one Democrat voted in favor of Mnuchin’s confirmation. No Republicans voted against it.