Steven Mnuchin, President-elect Donald Trump’s pick for treasury secretary, found himself on the defensive for failing to disclose $100 million in real estate assets on his financial disclosure forms before today’s confirmation hearing.
Sen. Debbie Stabenow, D-Mich., pointedly asked Mnuchin, a former hedge fund manager, if he would support closing tax loopholes in the U.S. that “extremely wealthy people use, such as yourself, to avoid paying taxes?”
She said Mnuchin, 53, also failed to include his position as a director of a Cayman Islands holding corporation.
Mnuchin said his offshore bank accounts in the Cayman Islands were used only to benefit nonprofits and pension funds and were allowable by law. Regarding the omission about his position in a shell company, Mnuchin claimed the mistake was an oversight.
“As you all can appreciate, filling out these government forms is quite complicated,” he testified before the Senate Finance Committee.
“I did not use a Cayman Island entity to avoid paying taxes for myself ... We shouldn’t be encouraging people to set up Cayman Island funds,” he said, arguing that we need to “close these tax issues that make no sense.”
Mnuchin said he supported changing the nation’s tax laws so they’re “simpler and more effective.”
“My No. 1 priority is growth in the economy,” Mnuchin said. “Tax reform will be our first and most important part of that.”
He added, “There is excess regulation that is hurting growth.”
Mnuchin faced tough questioning throughout the hearing about his stances on sanctions and other issues and was forced to defend his role in IndyMac, a failed mortgage lender that was seized by the U.S. government.
“In the press, it has been said that I ran a foreclosure machine,” Mnuchin said.
He insisted that he made efforts to keep people in their homes by providing 100,000 loan modifications.
“I felt great empathy for the thousands of Americans who lost their home because of a system that failed them,” he said.
Sen. Sherrod Brown, D-Ohio, pressed Mnuchin about the 10,000 homeowners who were foreclosed on at the behest of OneWest Bank, the former IndyMac, which Mnuchin and a group of investors purchased and renamed in 2009. Brown said OneWest forced from their homes at least 23 borrowers who were current on their mortgages.
“What I would say is we follow the same procedures that the FDIC followed. We inherited the procedures,” Mnuchin answered.
He did admit that OneWest foreclosed on 54 active duty military members.
“We unfortunately did disclose on certain people in the military, and it was unfortunate and inappropriate, and we responded and made them whole,” he said. “Every single person had the opportunity to have their mortgage reviewed, and we corrected errors.”
When Sen. Ben Cardin, D-Md., asked Mnuchin about his stance on sanctions, particularly the sanctions imposed on Russia, Mnuchin said he was “100 percent” committed to enforcing sanctions against Moscow.
“I will use [sanctions] to the maximum amount of the law,” he vowed.
After Sen. Claire McCaskill, D-Mo., brought up the topic of sanctions again, Mnuchin testified that he opposes lifting current sanctions on Russia. But he refused to answer if he would recommend additional sanctions on the country, saying that he needed access to classified reports before deciding.
McCaskill expressed concern about Trump’s businesses in a heated exchange with Mnuchin.
“He is not divesting any business interests, correct?” McCaskill inquired.
“Correct. I believe he sold his public stocks,” Mnuchin replied.
“Is it fair to categorize him as an international businessman?” she continued.
“I believe so,” Mnuchin said.
“He will enjoy the benefits of his business success while he is president, correct?” she asked.
“Again, I believe he will do everything legally —” Mnuchin said.
“This is not my question. My question is, he has said very loudly he will go back to his business after he is president, even said he would fire his sons if they had not done a good job. So whatever success his business enjoys during his presidency, he will get the benefit of, correct?” McCaskill retorted.
“Yes, he is the economic owner, so by definition, I would assume that he would have that,” Mnuchin said.
She followed up by asking Mnuchin what percentage of Trump’s debt is held by foreign interests.
“If I’m confirmed, I will research that and get back to you,” Mnuchin said.
But then he appeared to backtrack, saying, “I’m not willing to make a commitment, but I will speak to the chairman of this committee and to the president.”
Earlier, Mnuchin asserted that Trump was not in violation of the Constitution by refusing to put his business assets into a blind trust, as recommended by various ethics experts.
“I know the president-elect is absolutely following the law and is committed to following the law and has set out a series of — although not a blind trust — he has removed himself from his business, he put his sons in charge of his business,” he said. “I can assure you that in my job of treasury secretary, whatever responsibilities I have to monitor these issues, which are very important, I can assure you that I will do.”
Mnuchin indicated that he would support raising the debt ceiling if necessary to avoid a U.S. default.
“I firmly believe that the U.S. has to honor its debt,” Mnuchin told the committee, despite previous statements made by Trump that the U.S. could renegotiate its debts or print more money.
Mnuchin promised he would “commit to work with Congress so we don’t get to the last minute and run out of money,” adding that the debt ceiling might need to be raised “sooner rather than later.”
He dodged questions, however, about what specific level of debt he finds “unacceptable.” One senator claimed that Trump’s economic plan would increase the nation’s debt by an estimated $7.2 trillion over 10 years, a statement Mnuchin disputed based on “dynamic” scoring.
“Trump has a pro-economic-growth tax plan, and we are sensitive to the cost of that plan,” Mnuchin said.
Sen. Tom Carper, D-Del., grilled Mnuchin over Trump’s pledges to impose a high tariff on goods imported from Mexico.
Mnuchin replied that the North American Free Trade Agreement should be reopened but that he was “optimistic that we can renegotiate a deal that’s advantageous to us and to Mexico.”
In closing, Sen. Ron Wyden, D-Ore., hit Mnuchin again for failing to disclose almost $100 million in Cayman Islands real estate funds. “This was not self-corrected,” said Wyden. “My staff had to tell you.”
Wyden said those funds weren’t just “helping churches and pensions ... I have an SEC document showing that you were also helping a lot of private investors as well.”
But Orrin Hatch, R-Utah, had nothing but praise for Mnuchin.
“You’ve certainly impressed a lot of people, including me,” he said. He recalled a private conversation he recently had with Mnuchin.
“You’re going to lose a lot of money taking this job,” Hatch said he told Mnuchin.
His response, according to Hatch: “I don’t care. I want to serve my country.”