The L.A. Times – Steven Mnuchin, the Wall Street executive chosen by President-elect Donald Trump to be the next Treasury secretary, was pressed by Democrats at his confirmation hearing Thursday about aggressive home foreclosures conducted by OneWest Bank during his time as chairman of the Pasadena institution.
If confirmed, Mnuchin, 54, a hedge fund manager and Hollywood movie producer, would become a pivotal player in the Trump administration on the economy, trade, tax reform, housing policy, financial regulation and relations with China and other global economic powers.
Mnuchin strongly defended himself against charges OneWest was a foreclosure machine.
”Since I was first nominated … I have been maligned as taking advantage of others’ hardships in order to earn a buck,” Mnuchin told the Senate Finance Committee. “Nothing could be further from the truth.”
Mnuchin said OneWest tried to help homeowners avoid foreclosure but often was limited by federal regulations.
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”My experience confirmed that we must identify and eliminate unwise and burdensome policies which contribute to the disastrous outcomes that came in the wake of the financial crisis,” Mnuchin said.
In addition to supporting Trump’s deregulatory push, Mnuchin committed to reducing taxes and “reviving trade policies that put the American worker first.”
Liberals have criticized Mnuchin, a multimillionaire, because of his long career at Goldman Sachs Group Inc. and his role in dealing with the mortgages held by failed subprime giant IndyMac.
He is one of the top targets of Senate Democrats among Trump’s Cabinet picks. In hopes of derailing his nomination, Democrats and liberal activists are focusing on OneWest’s foreclosures.
Mnuchin also could face questions about his ties to Relativity Media, the once high-flying film and TV studio that he once co-chaired. Relativity co-financed hit movies such as “Bridesmaids” and “The Social Network” but filed for bankruptcy in 2015.
Just before the filing, the studio repaid $50 million it owed to OneWest. A Relativity creditor, RKA Film Finance, sued the studio along with Mnuchin and former Relativity Chief Executive Ryan Kavanaugh, alleging that some of RKA’s funds were improperly used to repay OneWest. The case was dismissed in October but the judge said RKA could refile it.
On Wednesday, Sen. Sherrod Brown (D-Ohio), asked the FBI to release information about an investigation into Relativity. In December, the FBI denied a Freedom of Information Act request from MuckRock, a government watchdog group, seeking information on Relativity because of Mnuchin’s ties to the company. In denying the request, the FBI cited concerns that disclosing the information could “interfere with enforcement proceedings,” Brown said.
“If Mr. Mnuchin is to be confirmed … we must ensure that his ability to do the job of overseeing American finance and trade in a manner befitting that office is in no way compromised,” Brown wrote to FBI Director James Comey.
Brown is a member of the Senate Finance Committee and is likely to question Mnuchin about the matter.
But the main Democratic line of questioning is expected to zero in on OneWest’s foreclosure practices.
In 2009, Mnuchin and other investors put up nearly $1.6 billion to buy IndyMac and renamed it OneWest Bank. They sold the bank to CIT Group in 2015 for $3.4 billion. Trump has said Mnuchin ran the bank “very professionally” and touted the return on his investment.
But Democrats and housing advocates have dubbed Mnuchin “the foreclosure king” for what they said was the bank’s aggressive practices. They accused him of profiting from the 2008 financial crisis that left many homeowners unable to make their mortgage payments.
Mnuchin critics point to a 2011 regulatory order from the federal Office of Thrift Supervision that OneWest failed to follow procedures when foreclosing on homeowners.
“Foreclosures happen in an economic crisis. But OneWest was different. It quickly gained a reputation as a foreclosure machine,” said Sen. Elizabeth Warren (D-Mass.) “Even when compared to the other financial institutions that aggressively and illegally tossed families out of the houses, OneWest was notorious for its belligerence and for its cruelty.”
Warren and two dozen other Senate Democrats pressed Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) to allow some OneWest mortgage-holders to testify at Mnuchin’s confirmation hearing. After Hatch did not agree to include them at the hearing, Warren and several other Senate Democrats held a forum with the four foreclosure victims on Capitol Hill on Wednesday.
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Christina Clifford of Carlsbad choked up as she told of her experience with OneWest, which foreclosed on her Whittier condominium in 2010 after twice saying it lost her paperwork for a mortgage modification despite cashing the checks she sent with the forms.
“Steve Mnuchin profited from people like me, even when we did everything we could to keep our homes,” said Clifford, who runs an acupuncture business.
She and three other women with OneWest mortgages who were foreclosed on or are fighting foreclosures urged the senators to oppose Mnuchin’s confirmation. And several Senate Democrats at the forum appeared set to vote against him.
“We need a Treasury secretary who will fight for Americans, not one who has made a fortune fighting against them,” said Sen. Robert Menendez (D-N.J.)
Mnuchin said Thursday that he and his fellow investors spent $1.6 billion to buy what he described as “the costliest bank failure ever…because we believed in our ability to rebuild and create a successful regional bank.
“Let me be clear: my group had nothing to do with the creation of the risky loans in the IndyMac loan portfolios,” Mnuchin said. “When we bought the bank, we assumed these bad loans which had been originated by previous management.”
The bank modified more than 100,000 mortgages, Mnuchin said, describing the bank as “a loan modification machine.”
Although OneWest inherited the bad loans, it didn’t have to pursue the foreclosures so aggressively, said Paulina Gonzalez, executive director of the California Reinvestment Coalition, a group that advocates for fair and equal credit access.
The bank foreclosed on 60,000 homes, including 36,000 in California, and denied 3 in 4 mortgage modification requests from homeowners seeking smaller monthly payments, she said.
“Mr. Mnuchin’s tenure at OneWest Bank shows him to work in his interest and in the corporate interest, at great expense and harm to everyday Americans,” Gonzalez said.
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