Hollywood financier Steven Mnuchin created a stir on his first day as President-elect Trump’s choice to be Treasury Secretary — both for comments he made about the new administration’s tax plans, and for his involvement with housing lender OneWest.
He startled many policy mavens this morning with comments on CNBC’s Squawk Box about Trump’s plans.
Mnuchin said that proposals to slash marginal tax rates and cut the corporate rate would not benefit wealthy payers — contradicting analyses by independent groups including the Tax Foundation and the Brookings Institution and Urban Institute’s Tax Policy Center.
“Any reductions we have in upper-income taxes will be offset by less deductions so there will be no absolute tax cut for the upper class,” Mnuchin said.
He says the plans would result in “a middle-income tax cut.”
Mnuchin also told Fox Business News that Trump will end government control of the Federal National Mortgage Association (also known as Fannie Mae) and Federal Home Loan Mortgage Corp. (Freddie Mac) “reasonably fast.”
That sent Fannie Mae shares soaring 41.8% with Freddie Mac up 42.7% in afternoon trading. The institutions promote mortgage lending, and have been controlled by the government since 2008 when the housing bubble collapsed: They buy the loans from lenders, and sell securities based on them that they back to guarantee against default.
The stock prices rose as investors speculated that Trump might allow Fannie Mae and Freddie Mac to keep their profits instead of turning most of them over to the government.
It’s a sensitive subject for Mnuchin. His Dune Capital bought housing lender IndyMac out of bankruptcy in 2009, relaunching it as OneWest before selling it to CIT Group in 2015. Mnuchin sits on the CIT board.
With IndyMac “we bought the worst mortgage portfolio in the history of time,” he told CNBC. Regulators who looked at the deal “thought it made sense.”
Still, that experience preceded by his work as head of mortgage lending for Goldman Sachs — which he left in 2002 after 17 years — gave Democratic opponents ammunition to attack Mnuchin.
Massachusetts Sen. Elizabeth Warren called him “the Forrest Gump of the financial crisis” adding that he “managed to participate in all the worst practices on Wall Street.”
Ohio Sen. Sherrod Brown called Mnuchin “a hedge-fund manager whose Wall Street ties couldn’t run deeper…This isn’t draining the swamp — it’s stocking it with alligators.”
Mnuchin’s Dune Capital has been active in Hollywood, helping to finance the X-Men franchise, Gravity, The LEGO Movie, Avatar, and Life of Pi. The Treasury Secretary nominee also briefly served as co-chairman of Relativity Media, leaving before mid-2015 when it filed for Chapter 11 bankruptcy protection.