It would be a pity, for Steven Mnuchin, if his nomination for Treasury secretary were to come unstuck over 27 cents. Yet that is the sum for which OneWest, the bank he chaired, tried to foreclose on the house of Ossie Lofton two years ago.
Ms Lofton, then 90, was sent a bill for $423.30: an insurance premium on credit secured against the equity in her home in Lakeland, Florida. She sent back a cheque for $423. OneWest asked for the 30 cents. She wrote another cheque, mistakenly making it out for 3 cents. Then the bank served a foreclosure notice.
To critics such as Elizabeth Warren, the Democratic senator from Massachusetts, this kind of thing should automatically disqualify Mr Mnuchin from high office. Within hours of his nomination this week by Donald Trump, the president-elect, Ms Warren put out a statement characterising the multimillionaire banker as “the Forrest Gump of the financial crisis”, caught up in “all the worst practices on Wall Street” during his career at Goldman Sachs, a hedge fund and at OneWest.
Lynn Drysdale, a lawyer for Ms Lofton, will not be drawn on whether she thinks Mr Mnuchin is fit for the job. But she says that the big fuss over a quarter and two pennies, first reported by Politico, is part of an “epidemic” of similar cases affecting elderly people, many of them involving OneWest.
The Pasadena-based bank, chaired by Mr Mnuchin between 2009 and 2015, when it was sold to CIT Group of New York, had “one of the worst, if not the worst” records in kicking people out of their homes over that period, says Kevin Stein, deputy director of a credit advocacy group in California.
Nobody doubts that Mr Trump’s pick for Treasury secretary is a smart and determined man. Former colleagues and associates rave about the composure he showed during the buyout of OneWest (then known as IndyMac), marshalling an all-star team of investors — George Soros and Michael Dell among them — during a particularly intense phase of the crisis.
Others admire the way he broke in to Hollywood as an executive producer, popping up on the credits of blockbusters like The Lego Movie and American Sniper. One former colleague chuckles at the thought of Mr Mnuchin, twice married with three children, posing stiffly on red carpets with his glamorous fiancée, Louise Linton, a 35-year-old B-list actress from Edinburgh.
Still, some who know him seem worried by his latest turn. They fear he will receive a rough ride in nomination hearings if senators rake over cases such as Ms Lofton’s or query his stroke of fortune in pulling $3.2m out of Bernard Madoff’s Ponzi scheme in 2005, three years before it fell apart. A trustee later sued Mr Mnuchin to recoup losses, but dropped the case after a federal appeals court ruled that it was too late to claw back the cash.
For others, the real problem is Mr Mnuchin’s lack of experience on the really big stage. If confirmed as America’s 77th Treasury secretary, the 53-year-old would follow in the footsteps of Robert Rubin (1995-1999) and Hank Paulson (2006-2009), both of whom ran Goldman Sachs (as co-chair and chief executive respectively) before leaving for government.
“Rubin is a one-in-a-million guy and Paulson did a very good job in a difficult situation,” says one former colleague at the Wall Street bank. “Steve is a second-stringer behind those guys.”
His upbringing, on Manhattan’s Upper East Side was comfortable. His father, Robert, was a partner in the equities department at Goldman Sachs, credited with pioneering the art of trading big blocks of stock. Robert now runs an art gallery, known for dealing in abstract expressionists like Pollock, de Kooning and Rothko.
One of five children, Steven was sent to New York’s elite Riverdale Country School and then to Yale. At Goldman he did well in trading mortgage bonds. He entered the partnership in 1994, the year his father retired, rising to chief information officer before leaving in 2002. It was an era of partners splitting off from Goldman to run their own funds, normally seeded with tens of millions from their former colleagues’ personal accounts. At Dune Capital Management, Mr Mnuchin did a little better than the average; better than Christopher Flowers at JC Flowers; better than Mike Novogratz at Fortress, says one former Goldmanite.
OneWest was the deal that made Mr Mnuchin mega-rich. The bank was sold for $3.4bn, a little over the book value of its assets; but the purchase price was so low that the consortium more than tripled its money, when including dividends paid along the way.
The president-elect’s choice for the commerce secretary — Wilbur Ross, a 79-year-old private-equity baron — did similarly well out of BankUnited, a Florida-based bank that hit the skids not long after IndyMac. Mr Mnuchin and Mr Ross are “sharpies”, says Todd Baker, a former banker and now a senior fellow at Harvard Kennedy School. They cut great deals because the Federal Deposit Insurance Corporation, which had taken control of dozens of banks during the crisis, was desperate to get the big ones off its hands. “The [FDIC] got their heads handed to them,” he says.
Mr Trump this week celebrated the “very professional” job Mr Mnuchin did at OneWest, and the billions of dollars he made for his investors.
“That’s the kind of people I want in my administration,” he said, “representing our country.”
The writer is the FT’s US banking editor
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