Accessibility links

USA

Investor Mavens Tapped by Trump Face Senate Hearings

  • Michael Bowman

FILE - Commerce secretary nominee Wilbur Ross, left, and Treasury secretary nominee Steven Mnuchin are shown in this composite image from AP and Reuters photos.

President-elect Donald Trump's Cabinet-to-be is filled either with demigods of capitalism who will propel America to a new era of economic greatness or villainous predators who profited enormously from the financial ruin of others, depending on your view.

Both narratives will be heard in Washington this week as the Senate holds confirmation hearings for Treasury secretary nominee Steven Mnuchin and Commerce secretary nominee Wilbur Ross.

Mnuchin, a one-time partner at Wall Street giant Goldman Sachs, led a group of investors who bought out a failing California bank at the height of the 2008-2009 financial crisis. He also started a high-risk, high-reward investment group known as a hedge fund and, more recently, financed some of Hollywood's biggest movies, including Avatar, X-Men, Batman v Superman and Mad Max: Fury Road, and served as Trump's chief fundraiser during last year's presidential contest.

Incoming Trump administration Commerce Secretary nominee Wilbur Ross (R) departs after working a simulated crisis scenario during transition meetings at the Eisenhower Executive Office Building at the White House in Washington, Jan. 13, 2017.
Incoming Trump administration Commerce Secretary nominee Wilbur Ross (R) departs after working a simulated crisis scenario during transition meetings at the Eisenhower Executive Office Building at the White House in Washington, Jan. 13, 2017.



Ross is a billionaire who has specialized in buying out failing businesses, from American steel companies to coal mining operations to textile enterprises, what some see as "vulture" capitalism. In the 1980s, he helped rescue Trump's failing casinos in Atlantic City, New Jersey.

Both men say the U.S. economy is underperforming and can do far better.

"Our most important priority is sustained economic growth. I think we can absolutely get to sustained three-to-four percent GDP [gross domestic product]," Mnuchin said on CNBC late last year. "And to get there, our No. 1 priority is tax reform."

"One of the problems with the recovery is that the newly-created jobs are not nearly as remunerative as were the jobs that were lost," Ross said, appearing alongside Mnuchin on CNBC."That's a very big structural problem."

Both nominees will face hours of questioning from senators at confirmation hearings this week. Partisan divides emerged as soon as Trump tapped them after the November election.

Democrats portrayed Mnuchin as a Wall Street insider who first profited from financial products based on risky loans that contributed to the 2008 financial crisis, then profited again by foreclosing on the homes of Americans who defaulted on their mortgages.

Incoming Trump administration Treasury Secretary nominee Steven Mnuchin departs after working a simulated crisis scenario during transition meetings at the Eisenhower Executive Office Building at the White House in Washington, Jan. 13, 2017.
Incoming Trump administration Treasury Secretary nominee Steven Mnuchin departs after working a simulated crisis scenario during transition meetings at the Eisenhower Executive Office Building at the White House in Washington, Jan. 13, 2017.



"After years peddling the kind of dangerous, mortgage-backed securities that eventually blew up the economy, Mnuchin swooped in after the crash to take a second bite out of families by aggressively, and sometimes illegally, foreclosing on their homes," said Democratic Senator Elizabeth Warren of Massachusetts in a statement. "This man has engaged in the worst kinds of practices on Wall Street and directly hurt thousands of working families."

By contrast, Republican Senator Orrin Hatch of Utah said Mnuchin's "... wealth of private sector experience will serve him well in this new role. He understands that advancing meaningful policies to reform the tax code, promote investment and spur job creation are essential to growing our economy and ensuring middle-class families get to keep more of their paychecks."

Mnuchin is a believer in so-called "supply-side" economics that tax cuts generate additional economic activity, thereby boosting prosperity as well as tax revenues to the government.

"By cutting corporate taxes, we'll create huge economic growth and we'll have huge [gains in] personal income," the Treasury secretary nominee said. "The problem has been for the last eight years, there's been no economic growth. For the average American worker, they've gotten nowhere.And our job is to make sure that the average American worker has wage increases and good jobs."

Mnuchin did not dispute that he oversaw the repossession of thousands of distressed properties, the sales of which ultimately netted a profit, but noted that the bank had made those loans before his investment group took over the institution.

He also criticized financial reform under the Obama administration that strengthened lending requirements.

"The No. 1 priority is going to be, make sure that banks lend [money]," Mnuchin said on CNBC.

Several Democrats on the Commerce committee said they are reserving judgment on Ross until his testimony this week. Republicans are not.

"Wilbur Ross's business experience makes him an excellent choice for Secretary of Commerce," said Republican Senator Tom Cotton of Arkansas. "I'm confident he'll be a champion for American economic interests at home and abroad.I look forward to supporting his nomination.

XS
SM
MD
LG