Trump turns to Wall Street for Cabinet secretaries
Treasury, Commerce picks are billionaire investors whose firms have tangled with federal regulators.
WASHINGTON — President-elect Donald Trump is adding two more billionaires to his proposed Cabinet, including Wall Street executive Steven Mnuchin as Treasury secretary and financier Wilbur Ross as head of Commerce, according to a person familiar with the decision.
Mnuchin’s deep roots on Wall Street fit the mold of past Treasury secretaries but contrast with the populist stance that Trump took during his campaign.
Mnuchin, also a Hollywood movie producer and Trump’s campaign finance chairman, and Ross, known as the king of bankruptcy for his investments in distressed properties, would be the second and third billionaire members of Trump’s Cabinet, joining Betsy DeVos, who is Trump’s pick for Education secretary.
Mnuchin’s selection — which was first reported Tuesday by the New York Times — drew ire from Democratic and liberal groups, which have accused him of profiting from the financial crisis after buying the failed IndyMac Bank in 2009.
“So much for draining the swamp,” said Adam Hodge, communications director for the Democratic National Committee. He said Mnuchin “preyed on homeowners struggling during the recession,” calling Trump’s pick “a slap in the face to voters who hoped he would shake up Washington.”
Officials with Trump’s transition team declined to
confirm Mnuchin’s selection, which may be announced as early as Wednesday.
Mnuchin, 53, co-chief executive of hedge fund Dune Capital Management, served as chairman of the Pasadena-based bank, which was renamed OneWest Bank after he led a group of investors to purchase it. The bank has been criticized for a large number of foreclosures and hit by allegations of discrimination against minorities. It also helped finance high-profile films such as “Suicide Squad,” “American Sniper” and “Mad Max: Fury Road.”
During the campaign, Trump sharply criticized his Democratic opponent, Hillary Clinton, for being too cozy with Wall Street.
Now Trump has tapped Mnuchin, who spent 17 years at Goldman Sachs Group Inc., to be one of the federal government’s most important economic and financial officials.
Mnuchin rose to partner and chief information officer at the legendary Wall Street investment bank, where his father also had been a partner, before leaving in 2002 to work with billionaire investor George Soros.
Two years later, Dune Capital Management was co-founded by Mnuchin as a spinoff from Soros’ firm.
If confirmed by the Senate, Mnuchin would be the third former Goldman executive to become Treasury secretary in recent years, after Robert Rubin under President Clinton and Henry M. Paulson under President George W. Bush.
As Mnuchin’s name emerged as a leading candidate for the Treasury post, the Progressive Change Campaign Committee called Mnuchin “a secondgeneration Goldman Sachs banker who made a fortune by foreclosing on working families’ homes.” The group criticized him for opposing tough Wall Street regulation.
Mnuchin would become a key player in world economics, meeting frequently with foreign finance ministers, and in overseeing the U.S. tax and financial system.
He would take the helm of an agency whose regulatory responsibilities swelled under the 2010 Dodd-Frank financial reform law.
The Treasury secretary serves as chairman of the Financial Stability Oversight Council, a panel of top regulators created by the law. Republicans have criticized the council as wielding too much power.
The Treasury Department also includes the Office of the Comptroller of the Currency, an independent agency that supervises national banks; the IRS; the Bureau of Engraving and Printing; and the Mint.
Mnuchin is a Yale University graduate who is divorced with three children. He owns a $26.5-million mansion in Bel-Air and has strong connections to Southern California.
In 2009, Mnuchin and other investors put up about $1.6 billion in cash to purchase IndyMac, one of the leading subprime mortgage lenders. They sold the bank to CIT Group last year for $3.4 billion. Mnuchin now serves on CIT’s board of directors.
The deal was nearly derailed by complaints about OneWest’s foreclosure practices.
OneWest had agreed to participate in a federal program to modify the mortgages of borrowers so that they would not lose their homes. But community groups said the bank aggressively pursued foreclosures, particularly in minority areas.
In 2011, dozens of activists protested the practices on the lawn of Mnuchin’s 22,000-square-foot Bel-Air home. That same year, the federal Office of Thrift Supervision hit the bank with a regulatory order saying it had failed to follow procedures when foreclosing on homeowners.
This month, two California advocacy groups asked federal housing regulators to investigate OneWest over allegations that it discriminated against or failed to serve minority communities.
The groups said OneWest had violated federal fair lending laws by “failing to effectively market, offer and originate mortgage loans and other loan products in communities of color. ”The groups also said the bank has a below-average level of branch locations in minority communities.
Ross, Trump’s pick as Commerce secretary, would be the administration’s chief liaison with the business community and a leading advocate for U.S. trade abroad.
Ross, 80, who was a senior policy advisor to Trump’s campaign, is worth $2.9 billion, according to Forbes magazine.
Like Trump, Ross has been critical of U.S. trade deals. He sharply criticized trade negotiators and called for the U.S. to withdraw from the yet-to-be-ratified TransPacific Partnership and to renegotiate the North American Free Trade Agreement. Trump has pledged to do both upon taking office.
“I think there’s a big difference between the impact of trade agreements on corporate America and the impact on Mr. and Mrs. America,” Ross said in an August interview with CNBC. “What we’re doing is we’re exporting jobs and importing products, instead of exporting products and keeping jobs.”
He headed the bankruptcy practice at investment bank Rothschild Inc. for a quarter-century before starting his own investment firm, WL Ross & Co., in 2000.
Ross sold his firm in 2006 to mutual fund company Amvescap in a deal that was valued at the time at as much as $375 million. He is still the investment firm’s chairman and chief strategist.
In August, WL Ross & Co. agreed to a $2.3-million settlement with the Securities and Exchange Commission to resolve an investigation into charges the company failed to properly disclose fees to some investors.