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Ex-Goldman Banker Mnuchin Installed As Treasury Secretary

WASHINGTON (Reuters) – President Donald Trump swore in former Goldman Sachs banker and Hollywood financier, Steven Mnuchin, as Treasury secretary on Monday, putting him to work on tax reform, financial de-regulation, and economic diplomacy efforts.

The U.S. Senate voted to confirm Mnuchin 53-47, with all but one Democrat opposing him over his handling of thousands of foreclosures as head of OneWest Bank after the 2007-2009 housing collapse.

At a White House swearing-in ceremony, Trump said Mnuchin would be a “great champion” for U.S. citizens.

“He will fight for middle-class tax reductions, financial reforms that open up lending and create millions of new jobs, and fiercely defend the American tax dollar and your financial security,” Trump said. “And he will also defend our manufacturing jobs from those who cheat and steal and rob us blind.”

Lawmakers, lobbyists, and business groups have been nervously waiting for Mnuchin to take office and fill in the many blanks on how he will pursue tax reform and handle delicate economic cooperation efforts with China, Mexico, and other trading partners worried that Trump’s “America First” strategy will upend decades-old trade rules and currency practices.

Mnuchin, 54, provided no details of his plans as he was sworn in.

“I am committed to using the full powers of this office to create more jobs, to combat terrorist activities and financing, and to make America great again,” Mnuchin said.

Trump has pledged to roll back the stricter financial regulation under the Dodd-Frank reform law enacted after the financial crisis, pursue tougher trade policies on China and Mexico to reduce U.S. trade deficits, and reduce business tax rates.

CHALLENGES COMING UP FAST

Mnuchin faces immediate challenges with the March 15 expiration of a U.S. debt ceiling suspension, ushering in the threat of a new default showdown, and a March 17 meeting of finance ministers from the Group of 20 major economies, where he will face tough questions about Trump’s plans to increase trade protections.

In April, Mnuchin will have to determine whether to declare China a currency manipulator as part of Treasury’s semi-annual currency report.

“There is a real open question as to whether this administration is going to cut itself off from international monetary cooperation, whether it’s exchange rate policies or attitudes towards multilateral institutions or international regulatory policy,” said Edwin Truman, a former Treasury and Federal Reserve official now with the Peterson Institute for International Economics

Among Mnuchin’s biggest jobs is managing a sprawling congressional tax reform effort that seeks to slash business tax rates and enact a new border tax adjustment system aimed at boosting U.S. exports.

Mnuchin will quickly need to build a core management team to handle such challenges.

Treasury and White House representatives did not respond to requests for comment on Monday on reports that Trump would soon nominate David Malpass, a former economist at failed Wall Street bank Bear Stearns, as Treasury undersecretary for international affairs, the agency’s top economic diplomacy job.

Malpass, a Trump campaign adviser who had been leading Treasury transition efforts, was seen as a leading candidate for the job, with experience from international economic posts in the Ronald Reagan and George H.W. Bush administrations.

Other names that have been floated for senior posts include Goldman Sachs banker Jim Donovan for deputy Treasury secretary and Justin Muzinich, a former Morgan Stanley banker, for undersecretary of domestic finance.

“FORECLOSURE MACHINE”

Mnuchin, a second-generation Goldman Sachs banker who led the firm’s mortgage bond trading but left the bank in 2002, came under fire from Democrats over his investor group’s 2009 acquisition of another failed lender, IndyMac Bank, from the Federal Deposit Insurance Corp.

The bank, rebranded as OneWest, subsequently foreclosed on more than 36,000 homeowners, drawing charges from housing advocates that it was a “foreclosure machine.”

Mnuchin grew OneWest into Southern California’s largest lender and sold it for $3.4 billion in 2015. He has also helped finance Hollywood blockbusters such as “Avatar,” “American Sniper” and this past weekend’s box office champion, “The Lego Batman Movie,” which took in $55.6 million.

The Senate on Monday also unanimously confirmed David Shulkin as secretary of veterans affairs, putting the only holdover from the Obama administration in charge of the second largest federal agency. Shulkin had been in charge of the VA’s sprawling health system for the past 18 months.

(Additional reporting by Emily Stephenson; Editing by Peter Cooney and Leslie Adler)

IMAGE: U.S. President Donald Trump (L) watches as Vice President Mike Pence (R) swears in Steve Mnuchin as Treasury Secretary next to his fiancée Louise Linton in the Oval Office of the White House in Washington February 13, 2017. REUTERS/Yuri Gripas

Treasury Nominee Mnuchin Hammered Over Offshore Tax Havens

WASHINGTON (Reuters) – U.S. Treasury Secretary nominee Steven Mnuchin said on Thursday he would work to eliminate the need for offshore tax havens, as Democratic senators accused the Wall Street veteran of using such vehicles to shelter hedge fund money from the government.

In a confirmation hearing before the Senate Finance Committee, President-elect Donald Trump’s pick to lead the Treasury was attacked for failing to promptly disclose he was a director of an offshore business vehicle domiciled in the Cayman Islands and owned more than $100 million in real estate.

Offshore tax havens used to shield income have become a symbol of the growing divide between rich and average Americans. Democrats seized on the disclosures, made late on Wednesday, to question Mnuchin’s qualifications to revamp the tax code.

“One does not go and create offshore entities at the end of the day other than to avoid, in some form or fashion, the tax laws of the United States. That’s pretty simple,” New Jersey Democratic Senator Robert Menendez said.

“We have to decide whether that’s necessarily the essence of what we want as leadership,” Menendez said.

Mnuchin, a former Goldman Sachs executive, hedge fund manager, and Hollywood film financier, said he moved his Dune Capital Partners LLC registry to the Caymans to allow for some pension fund clients to invest in his funds, not to avoid taxes.

But Mnuchin, 54, added that it “makes no sense” for the U.S. tax code to encourage the use of such entities. “In the hedge fund world these are only set up to make the accountants rich and I would love to work with the IRS to close these tax issues that make no sense.”

Among the incoming Trump administration’s top economic priorities is a massive tax reform effort aimed at lowering rates for businesses and individuals and closing many deductions and credits.

Mnuchin, who insisted his last-minute disclosures were not intentional but due to the complexity of his holdings, complicated federal forms and a lawyer’s advice that the real estate disclosure was not required, also tried to clarify Trump’s recent market-moving comments on the U.S. dollar.

The Republican businessman-turned politician, who will be sworn in on Friday, said in an interview published this week in the Wall Street Journal that the dollar’s strength was “killing us,” prompting the greenback to fall and gold prices to jump.

Mnuchin said he believed that Trump’s remarks, which usurped a role normally reserved for Treasury secretaries, referred to a short-term spike in the dollar due to market factors, not its longer-term value.

“The long-term strength over long periods of time is important” for the dollar, Mnuchin said.

He also said he would like to see an increase in the U.S. government’s debt ceiling “sooner rather than later” to avoid another standoff with Congress that could upset financial markets.

The current debt ceiling extension expires on March 15, but the Treasury would not likely exhaust its borrowing capacity for several more months after that.

‘FORECLOSURE MACHINE’

Democrats had gone into Mnuchin’s hearing perceiving him as one of the more vulnerable Trump nominees, partly due to his involvement with OneWest Bank, which he ran in the aftermath of the 2007-2009 financial crisis.

They hammered him for the 36,000 foreclosures that the bank pursued after Mnuchin struck a lucrative deal with the Federal Deposit Insurance Corp to absorb most of the losses from such actions.

Critics have described OneWest as a ‘foreclosure machine’ and Senator Ron Wyden, the committee’s top Democrat, criticized the bank’s automated “robo-signing” of foreclosure documents and foreclosing on the widows of reverse mortgage holders.

Mnuchin argued that his bank was a “loan modification machine,” offering payment reductions to 101,000 borrowers to try to keep them in their homes, and said his turnaround of the failed IndyMac bank, which became OneWest, saved thousands of jobs and homes.

(Reporting by David Lawder; Editing by Leslie Adler and Paul Simao)

IMAGE: Steven Mnuchin testifies before a Senate Finance Committee confirmation hearing on his nomination to be Treasury secretary in Washington, U.S., January 19, 2017. REUTERS/Joshua Roberts