Patrick Semansky/AP Photo
Treasury Secretary Steve Mnuchin speaks with reporters about economic impacts of the coronavirus outside the White House, March 29, 2020, in Washington.
Plenty of questions remain about the $2.2 trillion bailout package passed by Congress and signed by President Trump last Friday. Did it do enough to prevent mass layoffs? Will small businesses be able to access the loans earmarked for them quickly enough to provide relief? Is there really going to be an additional bill that centers the needs of workers over big corporations? But one question—who is the biggest winner of the record-setting stimulus package—we already know the answer to. It’s Steve Mnuchin.
As The Washington Post explained, Mnuchin is “poised to emerge from this as one of the most powerful Cabinet members in modern history, with broad discretion over tremendous amounts of funding that is critical to millions of American households and businesses during one of the worst economic crises in generations.” Indeed, the Treasury Secretary is at the helm of a $454 billion funding program, which the Federal Reserve can leverage into trillions, and from which money could go to big corporations, cities, and states, depending mostly on his own whims. He’s the point person on a separate fund worth around $50 billion for airlines and probably aircraft manufacturer Boeing. He’s responsible, through the IRS, for disbursing emergency $1,200 checks for 100 million people in rapid time. From here out this is Mnuchin’s economy; we’re just living in it.
It’s not just the startling sum of money, but the sweeping amount of latitude Mnuchin now carries with these funds. For the airline bailout, it’s up to Mnuchin as to whether or not the government will seek an equity stake in exchange for an expedited check (he’s indicated they might, but he’s leaving it to the companies themselves to suggest what form that would take). For the prohibition on stock buybacks, limits on executive compensation, or any other condition for bailout money recipients, Mnuchin can simply waive those requirements as he sees fit. He now wields extraordinary agency in an economy that’s hanging in the balance, dependent on government largesse. Mnuchin, the unelected former Goldman Sachs banker, Hollywood financier, and campaign money man, may well be the most powerful person in Washington.
Nothing less than time-honored bipartisanship helped him secure that position. Mnuchin has been celebrated for his willingness to work across the aisle, a rare trait in the Trump White House. And he did just that as the primary architect of the $2.2 trillion CARES Act. Pinballing between the Senate offices of Democratic Minority Leader Chuck Schumer and Republican Majority Leader Mitch McConnell, Mnuchin workshopped the bill until its corporate slush fund ballooned from $200 billion to $500 billion, eventually becoming so laden with lavish goodies for big business compared to its paltry worker relief that it made members of both parties squeal (albeit quietly) before signing it unanimously. Yesterday, The Wall Street Journal called Mnuchin “Washington’s indispensable crisis manager.”
Mnuchin, the unelected former Goldman Sachs banker, Hollywood financier, and campaign money man, may well be the most powerful person in Washington.
Mnuchin does have crisis experience, but his work in the last financial collapse earned him a different moniker. Back in 2009, at one of the lowest moments of recession, he recruited a gaggle of financiers to take over California’s IndyMac Bank, a subprime mortgage machine shut down amid the foreclosure crisis by the Federal Deposit Insurance Corporation. Mnuchin and his investors secured the bank for just $1.3 billion in cash, rebranded it as OneWest, and set to work carrying out more than 36,000 foreclosures, many based on plainly illegal behavior, including backdating documents, rigging foreclosure auctions, and gaming statutes. Infamously, OneWest foreclosed on a 90-year-old woman over a $0.27 payment discrepancy. For his trouble, Mnuchin bagged a $200 million stake, millions of dollars in annual compensation, and a new nickname: the “Foreclosure King.”
The FDIC pledged to backstop crisis-era banks, covering all losses above the first 20 percent on loan defaults, which OneWest exploited ruthlessly under Mnuchin’s leadership. The FDIC lost at least $13 billion on OneWest; but the bank made $3 billion in profits in the five years Mnuchin was at its helm. So grievous was his behavior, the California state attorney general’s Consumer Law Section detailed over 1,000 examples of violations conducted by Mnuchin’s bank, as reported by the Prospect’s David Dayen in The Intercept. But the state AG, one Kamala Harris, declined to bring charges.
If Harris had done her job, Mnuchin might be at worst disgraced and at best sitting behind bars. Instead, he’s at the control panel of the entire U.S. economy, with a virtually unlimited checkbook to meet his every whim and caprice, his actions deciding which business will live and which will die at a time of economic distress that could put the Great Depression to shame. He’s really that powerful. “The Treasury has the ability to move this money extremely quickly; there’s nobody that Secretary Mnuchin has to ask,” California Rep. Katie Porter warned on MSNBC. “He can decide $100 billion to this individual industry, $100 billion to that industry. Meanwhile, he could be ignoring some of the industries that most desperately need the money and that are some of the largest employers in the country.”
In their own telling of this story, Senate Democrats (Kamala Harris among them) limited Mnuchin’s power to simply jury and executioner, with an independent inspector general working as the judge, overseeing Mnuchin’s decision-making. But the inspector general, along with the five-member Congressional Oversight Committee, will at their best only get to investigate and report on bailout deals after the money is already out the door; the congressional panel doesn’t even have subpoena power.
Adding insult to infirmity, the Trump administration has made extremely clear that it doesn’t believe Congress is entitled to conduct any oversight at all.
Adding insult to infirmity, the Trump administration has made extremely clear that it doesn’t believe Congress is entitled to conduct any oversight at all. Donald Trump, predictably, announced he wouldn’t allow the inspector general to make reports to Congress without his “supervision.” Meanwhile, Elizabeth Warren sent a very serious letter to the Foreclosure King insisting that he play nice.
It’s easy to forget that Mnuchin was initially one of the most controversial members of the Trump cabinet. The Senate’s 53-47 vote split along party lines and was one of the slimmest ever for a Treasury pick. His confirmation vote was as hotly contested as Secretary of Education Betsy DeVos’s and Supreme Court Justice Brett Kavanaugh’s. And he repeatedly, demonstrably, lied to Congress throughout those confirmation hearings.
What will Mnuchin do with all this power? If the past is any indication, he will make sure he and his friends are made whole, which has been the through line of his work in finance, in Hollywood, and politics. Mnuchin was the architect of the Tax Cuts and Jobs Act, itself a $2 trillion giveaway to him and his most affluent friends. (He insisted that said tax cuts would pay for themselves, then when pressed for the nonexistent Treasury analysis of this claim, he released an almost laughable one-page report.) Already, Mnuchin’s shown a willingness to bring in various Wall Street institutions to help administer the gargantuan pot of money he’s now responsible for doling out. His friends and family at Goldman Sachs salivate. Other firms will likely get in on the mix as well.
While Mnuchin turns his attention to ensure that the corporate slush fund is meted out rapidly, there are already signs that help for individuals—in the form of $1,200 checks that could take four months to reach people, and loans to small businesses, being handled by a wildly overmatched Small Business Administration—will be resigned to the back burner. Those programs could do more to save the economy than low-interest loans and grants to Delta Airlines and hotel chains. But as Mnuchin proved in pioneering fashion 11 years ago, there’s no reason to believe that’s the primary function of a bailout. Not when there’s a buck to be made.
