Tuesday, 14 February 2017

Steven Mnuchin Confirmed as Treasury Secretary: The Preservation of ‘Government Sachs’

Yesterday, on Monday the 13th of February, Steven Mnuchin was confirmed as Treasury Secretary within President Trump’s administration. Whilst the media have been quick to highlight previous unsavoury business practices implemented by Mnuchin, this post will look at the broader picture and, potentially, the confirmation’s effect upon the forthcoming future of American (and therefore global) financial regulation.

Steven Mnuchin, confirmed to the position of Treasury Secretary by the narrow margin of 53-47 in the U.S. Senate, is having his previous actions during his time as CEO of OneWest Bank brought to the fore to cast doubt on his suitability as Treasury Secretary. OneWest Bank, which was previously IndyMac, was the organisation that Mnuchin reinvigorated, turning around its flailing fortunes after the height of the Financial Crisis - predicated upon its involvement in the mortgage securitisation scandal – ultimately selling the company for $3.4 billion in 2014. However, the practices utilised during his reign earned him the title ‘Foreclosure King’, simply due to the extensive numbers of people evicted from homes which were purchased with the help of OneWest and its predecessor IndyMac. IndyMac had in fact been so unscrupulous, that there are reports of them falsifying signatures on mortgage arrangements on behalf of elderly citizens, some of whom were suffering from dementia and other debilitating diseases – this ties in to a common practice in this area of finance, as demonstrated only recently with the convictions in Australia for precisely the same thing. The appointment of Mnuchin, which was on the back of Trump’s campaign pledge to ‘shake up Washington’ and to not let Wall Street ‘get away with murder’, has rightly drew criticism. Senator Sherrod Brown, an Ohio-representing Democrat (who sits on the banking, housing, and urban affairs committee) stated just before the vote that ‘now there’s no sheriff in town… You can get away with anything with Steve Mnuchin as Secretary of the Treasury’. With regards to his actions as CEO of OneWest, Senator Sheldon Whitehouse said ‘I simply cannot forgive somebody who took a look at that banking crisis and took a look at the pain that Wall Street had sent in a wave across all of America, and thought, “Ah, there’s a great new way to make money, foreclosing on people”’. Yet, whilst distasteful, the central ethos to predatory capitalism, which is arguably the version which exists today, is this quest for money irrespective of consequence (as previously mentioned in a recent post here on Financial Regulation Matters). So, yes it is extraordinarily distasteful to have this man at the helm, despite Republican calls that he is ‘smart, he’s capable, and he’s got impressive private-sector experience’, but as I will suggest next, it represents an issue far greater than distasteful confirmations.

During the lead-up to the Financial Crisis, the composition of the top economic-related jobs in President George W. Bush’s administration earned it the name ‘Government Sachs’ – this due to the presence of Stephen Friedman, Joshua Bolten, Robert Steel, William Dudley, and the most of famous of appointees, Henry ‘Hank’ Paulson. Yet, the connection between government and Goldman Sachs stretches much farther back than the turn of the millennium, allegedly going as far back as the Roosevelt administration with the appointment of Goldman Chief Executive Sidney J Weinberg to serve as the assistant director of the War Production Board. The link between the two stretches through many administrations since, perhaps peaking with the infiltration of Robert Rubin and his deregulation-inspired revolution that arguably stands as the root to today’s chaotic economy. Whilst it pays to look at the individual appointments of Presidents, it is worth looking at the bigger picture, and this connection between Government and Goldman Sachs, continues today. Following on from his Father, who was a partner in the firm, Steven Mnuchin was an Executive Vice-President and Co-Chief Information Officer at Goldman Sachs in a career spanning nearly 17 years with the preeminent banking giant. The appointment of Mnuchin consolidates a tripartite-of-influence that will affect the direction of the Trump Administration, particularly in relation to the most crucial element, that of the newly-created ‘White House Chief Strategist’ Steve Bannon. Bannon, who worked for Goldman during the highly-charged years of the 1980s, is becoming a central figure in the Trump Administration, with some suggesting that he was the driving force behind the recent ‘Muslim Ban’, which has caused great concern and debate across the world – Time magazine ran with Bannon on the cover, accompanied by the title of ‘the great manipulator’. The final component of the threesome, Gary Cohn, former president of Goldman, has joined the Trump administration as director of the National Economic Council and an assistant to the President for economic policy – all of the economic-related posts and positions of influence can trace their roots back to Goldman.

So, despite Donald Trump’s attacks on his opponents during the campaign trail, and his accusations that Goldman had ‘robbed our working class’, he has nonetheless continued a tradition that sees Goldman affiliates positioned within key elements of, perhaps, the most influential administration in the world. This is worrying yes, but for what reason? Is it worrying because this bank now has affiliates in almost every economically-key section of Government – perhaps, but this is nothing new. It is arguably more worrying that an administration that is seemingly insistent upon introducing divisive policies within society, and sweeping deregulatory reforms economically, only 9-years after the recent crisis, is so closely aligned to a company that can stand to make substantial profits at the expense of society, and has unquestionably demonstrated time and time again that it is willing to do so. The politics of the Trump Administration, in terms of its affect upon a number of different aspects of society, can be debated endlessly. For this post though, it is crucial that the narrative of the danger of deregulation so close to the last financial crisis is promoted and disseminated as loudly and widely as possible – the cost of experiencing another financial attack by financial elites may be too great to bear.

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